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TWST: Can we start with a quick introduction to Bradford & Bingley (London: BB.L)?

Mr. Rodrigues: Bradford & Bingley was a mutual savings and lending institution which demutualized in 2000. It is now around 75 in the FTSE 100. We are a UK retail financial services business. Our lending is primarily secured on residential property with some lending to social housing and commercial property borrowers. All our lending is secured. We are also a leading retailer of financial services; we are the biggest mortgage broker in the country. We broke insurance. We are the country’s largest branded independent financial advisor, selling mutual funds and wealth products. We are one of the leading realtors in the country.

TWST: Can I ask you to give a quick account of the regulatory changes occurring in the financial services space in the UK at the moment because it seems to be quite dynamic. There is depolarization, for example; the mortgage space is becoming regulated versus self-regulated, I understand. Can you talk to how this impacts your business?

Mr. Rodrigues: Yes, you’re absolutely right that the next two years is going to be a period of very considerable regulatory change in the UK. When we last spoke it was likely to happen; now it is certain to happen. Let’s look at the regulatory change in pieces. First, mortgage manufacturing and mortgage broking are being regulated. Second, general insurance broking is being regulated. Both mortgage broking and insurance broking, are very fragmented industries. They have a lot of sole proprietors or small firms that have hitherto not been regulated. We believe the impact of the regulatory change will be that quite a number of them will choose to become part of larger organizations, and clearly with our two leading retail brands, Charcol, which is the biggest mortgage broker in the country, and the MarketPlace at Bradford & Bingley, which is a broker of all manner of financial services, we would hope that some of the best of those people who are choosing no longer to be sole proprietors might end up working for us. Certainly, we are interested and active in recruiting in that segment. We see this as being a move to a more mature, more serious market, which lends itself to larger branded and professional organizations instead of small business. Turning to regulated products, which are our mutual fund, life and pension businesses, we are changing to a depolarized regulatory regime. You will recall that currently, you can either sell one manufacturers’ products or you have to sell everything in the market. Effectively, the new regulations introduce a third choice which is called multi-tie under which you can pick what you sell. We believe that we are well positioned to take advantage of what we think will be the two main options in a depolarized world. One will be fee paid full service financial advice. We expect the Charcol brand to operate in that space. And depending on the small print of the rules, our MarketPlace business will either stay as an independent advisor or it could move to multi-tie, offering consumers choice and transparency in pricing but a selected product range. This regime will be new for almost everyone else in the market, but it is very similar to what we do already with our two retail propositions, so we believe we’re well placed for the changes. When you move from being tied to a multi-tie environment, there are five things that you have to do, all of which B&B has been doing for the last two to three years. The first is that you have to learn how to buy other people’s products. Most banks in the UK or financial institutions in the UK have only ever sold their own products; now they are going to have to source from multiple suppliers which requires a skill set that many banks don’t have. We do. The second thing you have to do is to teach your sales staff to sell choice instead of just the products they manufacture. That means starting your discussion with a customer by finding out what the customer needs and then picking the right products for them. That’s fundamentally different to saying, “We’ve got three loans. Which one do you want?” So there’s a re-training element for staff. Third, you have to change your compliance regime. Fourth, you have to account for products and services bought from multiple suppliers. Most financial institutions haven’t had to do this because historically they have only dealt with “on us” transactions. And then fifth you have to establish new brands in the eyes of consumers. The British consumer believes most of the major financial institutions are what they have always been, which is tied. In summary, we have already had some success doing the five things that you have to do to offer choice. On balance, we think we’re well placed for regulatory change.