EU backs British bank aid

(BRUSSELS) - The European Commission said Monday it had backed state aid offered by Britain to banks Bradford & Bingley and Dunfermline, ending its last two probes into assistance offered as part of London bank restructuring.

"The decision in the case of Bradford & Bingley, together with the decision taken on Dunfermline, is closing the chapter of UK bank restructuring prompted by state aid in the context of the financial crisis," a European Commission statement said.

Bradford & Bingley was split-up, with impaired assets nationalised in 2008 under a liquidation plan.

"The commission has authorised the measures because they are appropriate and necessary for an orderly winding down of the bank while taking into account the necessity to preserve the confidence of creditors in the financial system and remedy a serious disturbance of the UK economy," the commission said.

Spanish banking giant Santander bought part of the assets of Bradford & Bingley for 612 million pounds in September 2009.

In the case of Dunfermline, a smaller building society mainly operating in Scotland, the part considered 'good' was sold in an auction to a competitor (Nationwide) with a state financial contribution of some 1.5 billion pounds (1.7 billion euros or 2.4 billion dollars) and the remainder put into administration.

The commission "found that the orderly break-up of Dunfermline resulted in the return to viability of the good part ... and that the liquidation of a substantial part of Dunfermline limited the distortion of competition caused by the aid," a separate statement added.

Building societies, or mutuals, are owned by their members and are not listed on the stock exchange. They also specialise in home loans.

In Britain the crisis first erupted in 2007 with the stricken Northern Rock, which was taken into public ownership.

The British government spent billions of pounds bailing out some of the country's biggest institutions including Royal Bank of Scotland, 84 percent owned by the state, and Lloyds Banking Group, in which London has a 43 percent holding.

Last month, Britain slapped a 50-percent tax rate on bank employee bonuses above 25,000 pounds to recoup some of the cash spent rescuing the financial sector.