Bright Day For British Banks As EC Okays Bradford & Bingham's Rescue, HBOS Shares Rise On News Of Brown Bailout Backing

Brussels, Belgium (AHN) - The European Commission announced on Tuesday the approval of the bailout of Bradford & Bingley. The rescue package made by the British government includes the purchase of B & B's $88.8 billion (50 billion pound) mortgage portfolio and sales of deposits and branches to Spanish bank Santander.

It was not only Bradford & Bingley which had good news. Report of British Prime Minister Gordon Brown backing a bailout of the Halifax Bank of Scotland by Lloyds TSB boosted HBOS' stocks by 25 percent.

The twin measures are part of the U.K.'s attempt to stem the collapse of British banks as Wall Street's financial woes move on to foreign shores.

The EC acted swiftly on Britain's request for approval of B & B's bailout package within 24 hours. The U.K. will submit a restructuring or liquidation plan for the embattled bank within six months, which will be examined by the EC based on its restructuring assistance regulations.

The EC, however, withheld its approval of a restructuring of German state bank WestLB pending the completion of an in-depth probe into the bank, said EU Competition Commissioner Neelie Kroes.

Following Brown's expression of support for Lloyd's takeover of HBOS, the bank's stock rose by 151 pence. Lloyd's shares also went up by 15 percent to 260.5 pence.

With the ongoing shake-up of the British banking system, veteran banker Sir Brian Pitman, who used to be chief executive and chairman of Lloyds, forecast only five or six banks will remain standing.

"When banks expand too quickly and rest too much on money market deposits, they make themselves less secure. It's that very rapid expansion that causes the problem," Pitman told BBC.