The position of the Treasury in respect of both banks reflects the normal credit hierarchy.
In the case of Bradford and Bingley, the Treasury and the Financial Services Compensation Scheme (FSCS) provided £18 billion of funding to enable all retail deposits held in the bank to be transferred to Abbey. Given that this funding replaced retail deposits, the rights of the Treasury and the FSCS in respect of the proceeds of the wind-down and the realisation of Bradford and Bingley’s assets rank above subordinated creditors, in the same way that the rights of retail depositors would have been senior to subordinated creditors. The Treasury also has a claim on the proceeds of the wind-down as Bradford and Bingley’s sole shareholder. This claim ranks below the claim of subordinated creditors, in the same way that it is usual for equity to rank below subordinated debt.
In Northern Rock’s case, the position of the Treasury again reflects the normal credit hierarchy: the Government as senior creditor ranks above Northern Rock subordinated bondholders while as shareholder the Treasury ranks below such subordinated debt.