FSA says closely monitoring Bradford & Bingley

By Sudip Kar-Gupta

AIX-EN-PROVENCE, France (Reuters) - The chairman of Britain's Financial Services Authority (FSA) said the regulator was closely monitoring Bradford & Bingley, the bank whose shares have slumped on concern about its business plan.

Bradford & Bingley (B&B) on Friday increased its rights issue to 400 million pounds after U.S. investor TPG Capital pulled out of buying a stake.

"We have taken a close interest in it," FSA Chairman Callum McCarthy told Reuters on the sidelines of a business conference in this southern French city.

Asked whether the FSA would continue to monitor Bradford & Bingley BB.L closely, McCarthy replied: "Of course."

The FSA is keen to avoid problems from the global credit crunch spreading across Britain's financial sector after the near collapse of British bank Northern Rock last year, which ended up being nationalised by the government.

TPG pulled out of buying a stake in B&B after ratings agency Moody's cut B&B's debt ratings, triggering a clause allowing TPG to scrap the agreement.

That prompted the FSA to step in to help ensure that an alternative financing plan was in place.

B&B had planned to sell TPG a 23 percent stake for 179 million pounds and raise 258 million through a rights issue. It will now seek a net 400 million pounds through the rights issue.