Worries over risk led the City watchdog to lean on banks to support the share sale at the troubled bank.
Major UK banks intervened in the Bradford & Bingley (B&B) share sale last week at the behest of the City regulator, the Times reports.
In what the newspaper terms an "unprecedented step", the Financial Services Authority (FSA) put pressure on Britain's five biggest banks to add their support to the planned rights issue (sale of new shares to investors) from B&B. As a result, the firms agreed to underwrite around £20 million of the £258 million cash call.
The FSA made its request, anonymous sources told the newspaper, after the rights issue's main underwriters Citigroup and UBS signalled that they wished to pass off some of their obligations to firms known as sub-underwriters in order to spread the risk of the rights issue going wrong. Concerned that this risk was being unevenly shared, and that the rights issue might collapse, the regulator then stepped in.
B&B has been one of the banks worst-hit by the ongoing credit crunch. Along with the revenue-raising rights issue, which was dramatically cut from £400 million at the beginning of last week due to a further deterioration in the value of its shares, the bank has sold off around 23 per cent of the firm to a US private equity house in a bid to shore up its balance sheet.
The bank has also lost its chief executive recently due to poor health.
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