B&B Blames Fraud Losses For Trading Slump

Troubled UK bank Bradford & Bingley (B&B) was drawn into financial trouble due to multi-million losses from fraud, the Independent reports.

Organised "mortgage frauds" were blamed by the firm in a trading update for the losses it suffered over the first four months of 2008. B&B puts the cost of these scams, of which it says there were a "small number", at around £15 million.

The bank's admission follows the recent release of figures from the Association of Chief Police Officers, which put the total annual cost of mortgage fraud in the UK for 2007 at £700 million.

News of the fraud follows a series of distress signals from the bank, which first revealed its 2008 trading losses earlier this week. B&B is not only heavily exposed to the slowing UK mortgage market through its lending business, but has been having severe difficulties with raising revenue on the money markets recently.

This is due to the high inter-bank rates - in other words, the rate at which banks are willing to lend to each other - which continue to be seen as a result of the credit crunch. It is these high rates which also caused the near-collapse of Northern Rock last year.

In a bid to raise funds, B&B has sold off approximately 23 per cent of the firm to US private equity firm Texas Pacific at what is thought to be a heavily discounted price. A £250 million shares sell-off is also planned.

Stock in the bank plunged 32 per cent in London yesterday. At one point, they traded at a record low of just 60p.