When regulators and governments are concentrating on moving the big financial pieces around, what fate awaits the pawns of the system? Bradford & Bingley, with a market capitalisation of just £400m, may soon find out.

A third-time-lucky recapitalisation plan for the lender, backed by four large institutional investors, seemed to have staved off disaster this summer. But with HBOS forced into the arms of Lloyds TSB last week, and comparable lenders either taken over, like Alliance & Leicester, now being digested by Santander, or ignominiously nationalised like Northern Rock, B&B must be feeling lonely.

In the wake of last week’s rating downgrade by Moody’s – leaving B&B one notch above junk status – the Financial Services Authority has started to sound out possible “white knights” that might be willing to ride to its rescue.

This could be just a precaution. The £400m share issue, while messy, strengthened B&B’s capital ratios. A new chief executive, Richard Pym, appointed over the summer, is cutting costs and shrinking the mortgage book.

If B&B were now in deep trouble, only weeks after its rights issue, it would surely cast doubt on the quality of the information used to encourage B&B’s four institutional champions, and others, to underwrite the shares.

But even if the FSA is merely sketching out emergency plans, the institutions are still in an awkward position. The value of their holding is gradually eroding – the shares have already fallen more than 25p against the 55p a share rights issue price.

To pull out abruptly would sacrifice the credit they built up by helping B&B in its darkest hour when TPG, the US private equity firm, unexpectedly withdrew from this summer’s capital-raising.

At this stage, B&B’s shareholders would be better reminding the regulator how their involvement this summer helped solve a potentially systemic problem. Since then, the landscape has changed so radically that it would be easier for the authorities to usher B&B off the field without putting the rest of the system in jeopardy.

By sticking with B&B, the shareholders could try to impede a Rock-style wipe-out for investors if the worst came to the worst. But that would be a real emergency.

While other options are still available, B&B’s original white knights should insist on a triangular consultation with management and regulator and try to prevent any concern about B&B turning into a crisis that might render their earlier gallant intervention worthless.

Bonuses: a cautionary tale

My first paid employment was a holiday job mis-selling fitted kitchens, bedrooms and double-glazing over the phone to people who couldn’t afford them. In fact, my task was even lowlier: to set up the meetings for the people who mis-sold kitchens, bedrooms and double-glazing to customers who couldn’t afford them. The hourly pay was minimal but this dodgy outfit had a “bonus culture” par excellence: if the meetings I had set up resulted in a sale, I was paid extra – but I had to wait before getting my bonus.

The really good telesales people probably stayed long enough to see their hard work translated into hard cash. I left after two weeks and, on politely inquiring later, was told (surprise, surprise) that none of my leads had generated a sale.

Now imagine the same company working to government-imposed rules that no bonus could be paid until the impact of any deal had been measured – or that any bonus would be clawed back later if the impact was negative. Was the customer satisfied? Had any of the windows fallen out, or kitchens disintegrated, over the 12 months since installation? Some staff might have agreed to work for basic pay and wait longer for their reward. Most would have lost motivation, quit, or just migrated to companies subject to fewer restrictions.

The rapid demolition of my first employer’s dubious business would have been a boon. But it was the rare example of an entirely rotten enterprise. Even during the current search for scapegoats, the same cannot be said of all Wall Street or the City.

It may be possible to devise a system that rewards the entrepreneurial and punishes the reckless, with few if any unintended consequences. It may even be clever timing to introduce such rules now, when staff are afraid to jump ship and bonuses are likely to be cut anyway.

But zealous reformers should realise that changing rules on bonuses is the easy part. Changing a whole culture is likely to prove far trickier – and riskier.

A new cash machine

Overheard at the local branch of Goldman Sachs: “How would you like your cash, sir: tens of millions, hundreds of millions, or billions?”

andrew.hill@ft.com

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