I APPLAUD Peter Montagnon, director of investment affairs at the Association of British Insurers (ABI), for trying to uphold principles and make sure bad precedents are not being set. I am referring, of course, to last weekend’s rescue of Bradford & Bingley, the mortgage bank, where its two financial advisers, UBS and Citigroup, were released from a legal agreement to underwrite a £300m rights issue at 82p per share.

The decision was taken after B&B’s own negligence in failing to identify that profits were in sharp decline. Rod Kent, B&B’s chairman, knew that when it shared that information with its investors its share price would tank - leaving its underwriters and sub-underwriters sitting on paper losses of as much as £100m.

Montagnon is quite rightly taking a close look at the events, but I would be surprised if he kicks up a stink, however much some quarters of the City might like him to.

Kent released UBS and Citi in order to sign up Texas Pacific, a private-equity group, which had agreed to buy a 23% stake at 55p per share. In doing so, he broke a cardinal rule in not having offered this discounted price to his investors first. My answer to that is, so what?

The arrival of Texas Pacific has ensured the bank has a future - in effect it has “franked” the share price. B&B investors still have a chance to subscribe for £256m worth of shares at 55p when they vote at the extraordinary meeting – and they should be pleased they still have a bank.

In the febrile atmosphere of last weekend, when information was being relayed between the Treasury, the Bank of England, Downing Street and the bank, there was a real danger the financial institution would not have survived on Monday when it announced a huge drop in profits. That is why an alternative rescue had to be put in place.

You can blame Kent all you want for chairing a bank that had lax controls, but his pragmatic action saved it last weekend. There have been plenty of interested parties who have phoned him since Monday, but Texas Pacific was the only offer on the table before then.

I hope when the ABI meets tomorrow it will see these were a unique set of circumstances. There was much carping in the City that UBS and Citi had walked away from their obligation to underwrite the issue. They didn’t, they were released.

The banks did have legal grounds to walk, but the reputational damage would have been immense. It is also an action that the financiers involved - Hew Glyn Davies and Jim Renwick at UBS; Robert Swannell, Nigel Mills and David Wormsley at Citi - would not have countenanced. Their reputations are worth more than the paper losses they would have been sitting on.

Kent did the right thing. His bank is now well capitalised, it has a future and, over time, that future will be valued a lot higher than the 69&190;p the price closed at on Friday. Some of the bank’s investors may feel bamboozled by the nuances of what happened last weekend, but to vote against the rescue on the grounds of principle would, in my view, be ill advised. The debate the ABI should be having is whether to pack a rights issue programme into a shorter timetable than is currently on offer.

The eye of the storm

[This article is subject to a legal complaint]

CLEVER, lucky, or heading for a crash. After B&B, the most talked about bank in the sector is Anglo Irish, which is listed in Dublin and London. As the accompanying graph shows, its share price has taken a mauling over the past year falling from €17 to €7.5 per share, valuing it at €5.7 billion (£4.5 billion).

The reason is simple. For the past five years it has been one of the most aggressive lenders to the property sector in Ireland and Britain, where it has a £16 billion loan book. That is why it has been dubbed “a building society on crack”.

The stock has been a favourite of people who like shorting shares in the hope of buying them back later at a cheaper price. The bank’s detractors say it is exposed to a sector that is seeing sharp declines in asset values and the danger that occupiers will default on rents.

The bank is adamant its loan book is well covered and is still confident that it can grow earnings per share by 15% this year. It says it has tight control over its clients, who are constantly monitored.

However, leaving that optimism aside, Anglo has been a very aggressive lender. It has also been run by a tight group who have been heavily incentivised to perform. The bank is sufficiently capitalised to withstand a downturn, but all its big chips are in real estate and it is in the eye of an economic storm that is showing no signs of relenting. It is one that will test its banking skills to the full.

Consolidation call

IAN LIVINGSTON, the newly appointed chief executive of BT, has a lot in his in-tray, but he must keep a weather eye on the consolidation taking place in the European telecoms market. Last week, France Telecom made a play for Sweden’s TeliaSonera and the sector is rapidly consolidating into four big players along with Deutsche Telekom, Telefonica and Vodafone.

There will come a time when BT is in the sights of one of these giants. With a market value of £16.8 billion it is not out of reach and with its strong position in the UK market it would make an attractive entry point. However, strong domestic competition means it does not dominate like incumbents in France and Germany.

Livingston’s challenge is to ensure that if someone does come knocking, they pay the highest price possible. Or perhaps he should go shopping himself.

Dune roaming

PAUL TAYLOR made no secret of it when he agreed to act for the super-rich Qatar Investment Authority. He was a leveraged finance specialist, setting up a vehicle to invest in leveraged situations. The most high profile of those was an attempted bid on J Sainsbury, the food retailer, and the other was buying a healthcare chain called Four Seasons.

Suddenly, leverage is out of fashion - and so is Taylor. He has in effect been fired by the QIA. However, to make him a scapegoat and give the impression they were hoodwinked is a cheap and unnecessary trick. Taylor is keeping his own counsel, but he must be tempted to break his silence.

john.waples@sunday-times.co.uk

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