Big banks 'were on call to save B&B rights issue'

UK clearing banks were lined up to bail out Bradford & Bingley's £400 million fund-raising in the clearest indication yet of how closely UK regulators are monitoring the banking sector.

HSBC, Europe's largest bank, had agreed to replace either of the underwriters, Citigroup and UBS, if they pulled out, two bankers told Financial News.

In the event, the two investment banks agreed to underwrite a cutprice rights issue and private-equity group Texas Pacific injected an extra £179 million of cash.

Financial Services Authority chairman Sir Callum McCarthy and chief executive Hector Sants held talks with Britain's top three banks in the five days leading up to B&B's reduced rights issue as its falling share price put the cash-call in peril.

None of the five big banks would comment. An FSA spokesman said: "We are in regular contact with senior management at lots of different financial institutions particularly in the current climate."

In the event, outside support was not needed because the FSA convinced Citigroup and UBS that they should stick with their underwriting commitments on the smaller, cheaper share issue.

They had claimed they could pull out after B&B said it would have to issue a profits warning. They argued that this was a material adverse change to the underwriting deal.