Governance

Directors' remuneration report - Remuneration for 2008

It is proposed that from 2008 the short-term performance components of both cash and deferred shares will be increased to 100% of salary for maximum performance and 50% at on-target performance, for the Executive Directors. Non-financial measures are being introduced to encourage greater focus on broader business results and to support the future success of the business. These will operate alongside the existing measures of individual contribution and Group underlying profit before tax.

The maximum number of matching shares will be reduced to 2.5 for each deferred share for 2008.

For matching awards made from 2009 (in respect of deferred awards relating to 2008 performance) TSR will be introduced as a second performance condition with equal weighting to the current performance condition of underlying EPS.

The addition of TSR as a performance measure creates a balance between performance conditions that are more directly within management control and conditions that are aligned with ultimate shareholder outcomes over the performance period. 50% of the award ('TSR Award') will be based on a condition measuring the Group's TSR against eleven UK focused FTSE 100 Retail Financial Services companies. In order to achieve the full matching TSR Award, the Group's TSR performance must exceed the median TSR of the constituents of the index by an average of 6% per annum with straight line vesting between these points as follows:

Performance below median	Nil
Performance at median or above	1 x match
Performance at median + 6% pa	2.5 x match (upper limit)

The other 50% of the award ('EPS Award') will be based on compound underlying EPS growth as follows:

< RPI + 3% pa	Nil
= RPI + 3% pa	1 x match
= RPI + 5% pa	1.75 x match
= RPI + 8% pa	2.5 x match (upper limit)

Pensions and other benefits

Roger Hattam and Mark Stevens, who were both appointed as Executive Directors with effect from 1 May 2007, are active members of the final salary based Staff Pension Scheme for basic salary up to the earnings cap (currently £112,800 pa).

From 1 July 2007, they both receive a 30% salary supplement in respect of their basic salary above the earnings cap. Prior to this date, they were receiving employer contributions of 15% of their basic salary, in excess of the earnings cap, into the defined contribution based Stakeholder Plan with Investment Solutions Limited. Steven Crawshaw and Robert Dickie receive a 30% salary supplement on their full basic salary and are not accruing any future pension benefits. They both have deferred pension benefits, in the final salary based Staff Pension Scheme, that increase in line with their future basic salary levels.

At the start of 2007, Chris Willford was receiving a 20% salary supplement on his full basic salary, in lieu of pensions accrual. From 1 July 2007, this was increased to 30% of his full basic salary.

Until his resignation as Executive Director with effect from 1 May 2007, Chris Gillespie was participating in the defined contribution based Stakeholder Plan with Investment Solutions Limited. The employer contribution to this arrangement was 15% of his full basic salary. From 1 July 2007, the lump sum life assurance cover was increased to 15 times full basic salary for all Executive Directors.

In line with typical market practice, other contractual benefits are provided in the form of a company car (or cash allowance), housing allowance, private medical insurance and permanent disability and accident insurance.

Changes to the EIP

Element		2007	Proposed for 2008
Cash element		Underlying profit before tax, personal objectives Maximum 60% base salary	Underlying profit before tax, personal objectives and range of key business performance indicators Maximum 100% base salary
Deferred element		Underlying profit before tax, personal objectives Maximum 60% base salary	Underlying profit before tax, personal objectives and range of key business performance indicators Maximum 100% base salary
Matching shares		Growth in Earnings per share ('EPS') Maximum match of 3 shares for each share held	Based on 50% Growth in EPS 50% Relative TSR Performance vs Peer Group Maximum match of 2.5 shares for each share held

Contracts

Group policy is to employ Executive Directors on one year rolling contracts (that expire at their respective normal retirement ages) although, on recruitment, longer initial terms may be approved by the Remuneration Committee covering a transition period. The principle applied on termination is that all legal and contractual arrangements are met, with no additional payments. Executive Directors receive a maximum of 12 months' basic salary and other contractual benefits (as outlined above) in the event of the Company terminating their contract without notice for any reason other than gross misconduct (when there will be no compensation). There are no special provisions relating to termination of employment following a change in control of the Group.

Employee share plan

The Company continues to encourage wider share ownership through the use of a savings related share purchase scheme. All eligible employees, including Executive Directors, may participate in the Group's Savings related share option scheme. Under the Group's savings related share purchase scheme participants are granted options over Bradford & Bingley plc shares. The Group operates both a three and a five year savings scheme. For the 2007 grant, the discount was 20% of the market value of a share at the time the option was granted. Following the 2007 invitation, approximately 37% of employees (including Executive Directors) were participants.

Chairman and Non-executive Directors' fees

Fee levels for the Chairman are determined by the Remuneration Committee with reference to a similar peer group to that used for Executive Directors and other senior executives. Consistent with current best practice, the Chairman is not eligible to participate in any form of performance-related incentive plan.

Fee levels for the Non-executive Directors are determined by a committee, the current membership being the Chairman, the Group Chief Executive and the Group Finance Director. Fee levels were reviewed in 2006 and increased with effect from 1 January 2007. Independent advice, on best practice and market fee levels, was obtained during the year, taking into account the responsibilities and time commitment of each Non-executive Director.

The Non-executive Directors do not participate in any incentive arrangements and do not have service contracts. Each receives a letter of engagement indicating that their initial term of appointment will be three years. Non-executive Directors do not receive any other benefits.

The policy of the Group is to review the fee levels and incentive arrangements from time to time.

The table below shows the fee structure of Non-executive Directors effective from 1 January 2007.

Fee structure of Non-executive Directors

Name		Basic Chairman/ Non-executive fee	Chairman of Audit Committee	Chairman of Remuneration Committee	Chairman of Balance Sheet Management Committee	Senior Independent Director	Total fees
Rod Kent		£265,000					£265,000
Louise Patten		£48,000		£10,000			£58,000
Ian Cheshire		£48,000					£48,000
Stephen Webster		£48,000	£22,000				£70,000
Nicholas Cosh		£48,000			£22,000	£5,000	£75,000
George Cox		£48,000					£48,000
Michael Buckley		£48,000					£48,000

Non-executive directorships

Executive Directors who hold Non-executive Directorships in other companies are permitted to retain their earnings from these posts. Currently, none of the Company's Executive Directors hold paid Non-executive appointments elsewhere.

Historic TSR Performance

Bradford & Bingley was a constituent member of the FTSE 100 index for the first half of the year. The graph below shows Bradford & Bingley's TSR compared with the companies comprising the FTSE 100 index over the past five years.

Compliance

This report sets out the framework of our remuneration policies and the tables show how this framework is applied to each individual Director in the year under review. The tables below have been audited in compliance with the Regulations.

Directors' service contracts

Executive Director	Age at 31 Dec 2007	Date of service contract	Company's notice period	Director's notice period
Steven Crawshaw	46	06 Apr 1999	12 months	12 months
Robert Dickie	48	31 Dec 2002	12 months	12 months
Chris Willford	45	30 Sep 2005	12 months	12 months
Roger Hattam	39	01 May 2007	12 months	12 months
Mark Stevens	38	01 May 2007	12 months	12 months

Directors' emoluments for the year ended 31 December 2007

£s	Salary/fees	Benefits	Payment in lieu of pension	Short term cash element 2007	Total emoluments 2007	Short term cash element 2006	Total emoluments 2006
Executive
Steven Crawshaw	640,000	8,548	192,000	272,000	1,112,548	360,000	1,045,913
Chris Willford	412,500	25,572	105,000	157,500	700,572	187,500	628,241
Robert Dickie	309,550	12,085	92,865	66,000	480,500	144,550	491,293
Chris Gillespie (resigned 1 May 2007)	104,150	7,817	-	-	111,967	144,550	450,673
Roger Hattam (appointed 1 May 2007)	220,000	7,466	32,581	132,000	392,047	-	-
Mark Stevens (appointed 1 May 2007)	220,000	7,466	32,581	132,000	392,047	-	-
Total	1,906,200	68,954	455,027	759,500	3,189,681	836,600	2,616,120
Non-executive
Rod Kent	265,000	-	-	-	265,000	-	210,000
Nicholas Cosh	71,250	-	-	-	71,250	-	60,000
George Cox (retired 31 December 2007)	53,250	-	-	-	53,250	-	47,500
Stephen Webster	70,000	-	-	-	70,000	-	60,000
Ian Cheshire	48,000	-	-	-	48,000	-	42,500
Louise Patten	54,667	-	-	-	54,667	-	42,500
Michael Buckley (appointed 26 July 2007)	20,738	-	-	-	20,738	-	-
Total	582,905	-	-	-	582,905	-	462,500
Total Directors' emoluments	2,489,105	68,954	455,027	759,500	3,772,586	836,600	3,078,620

Notes
Short-term performance remuneration shown above reflects amounts payable in respect of 2007 performance. Taxable benefits received by Directors consist principally of the provision of a company car, health benefits and, housing allowance. An amount in lieu of pension entitlement is shown separately. The 'Total Emoluments' reflect payments made to Directors for the period they served on the Board during 2006. Total emoluments for Roger Hattam and Mark Stevens reflect remuneration for their time as directors. Under the EIS 2007, awards, as a percentage of salary, paid as deferred shares, were: Steven Crawshaw 100%, Chris Willford 100%, Roger Hattam 100%, and Mark Stevens 100%. These shares were granted in February 2008.

Directors' accrued pension entitlements

(£000s)	Age as at 31 Dec 2007	Accrued pension entitlement 31 Dec 2007	Change in accrued benefit during 2007	Transfer value at 31 Dec 2007	Transfer value at 31 Dec 2006	Change in transfer value during 2007	Transfer value of increase in accrued pension 31 Dec 2007	Company's pension contribution 2007
Executive
Steven Crawshaw	46	125	12	1,876	1,305	571	100	-
Robert Dickie	48	29	2	450	320	130	20	-
Chris Gillespie (resigned 1 May 2007)	44	-	-	-	-	-	-	15
Roger Hattam (appointed 1 May 2007)	39	30	3	350	236	109	9	14
Mark Stevens (appointed 1 May 2007)	38	7	2	65	37	28	11	14

Notes
Pension disclosures are reported above in accordance with Directors' Remuneration Report Regulations 2002. The transfer values reported above reflect the capital value of the relevant pension assessed under market conditions at the end of 2007 and 2006 respectively. The change in transfer value during 2007 is reduced by the Directors' contributions to the scheme during 2007. The increase in accrued pension entitlement represents the change in the annual pension to which each Director is entitled as a result of changes in pensionable earnings, excluding inflation, and increases in pensionable service. Benefits have been valued at a retirement age of 60, with an adjustment made to the post 1 April 2005 benefits to reflect the fact these are reduced if paid before age 65. Steven Crawshaw and Robert Dickie ceased accrual on 5 July 2006. Their benefits continue to increase with pensionable salary rises. Accrued pensions for Steven Crawshaw and Robert Dickie will only be known precisely once they leave or retire. Their total pension at normal retirement date was accruing based on a target of 2/3rds of their final pensionable salary, offset by retained benefits in other pension schemes. Chris Gillespie was not a member of the defined benefit pension scheme but the Company contributed to a money purchase scheme until his resignation. Pension disclosures for Roger Hattam and Mark Stevens reflect entitlements, not only for their time as Directors, but for the whole of 2007. Roger Hattam and Mark Stevens have accrued defined pension entitlement as well as company contribution benefits to a money purchase scheme. The Trustees have reviewed the transfer value basis during 2007, and part of this is reflected in the change in transfer value. In 2007, pension payments due to former Directors amounted to £0.3m (2006: £0.3m).

Directors' share option grants

	At 31 Dec 2006	Granted in year	Exercised	Lapsed	At 31 Dec 2007	Exercise price (p)	Earliest exercise date	Last exercise date	price on exercise (p)	Date of exercise
Steven Crawshaw
Executive share option scheme
Prior to appt as Executive Director	48,863	-	-	-	48,863	291.83	Mar-04	Mar-11
Post appt as Executive Director	60,205	-	-	-	60,205	315.58	Mar-05	Mar-12
	81,655	-	-	-	81,655	281.67	Feb-06	Feb-13
Savings-related share option scheme
	4,331	-	-	-	4,331	371.66	May-11	Oct-11
Robert Dickie
Executive share option scheme
Prior to appt as Executive Director	81,655	-	-	-	81,655	281.67	Feb-06	Feb-13
Roger Hattam
Executive share option scheme
Prior to appt as Executive Director	3,149	-	-	-	3,149	311.67	Sept-04	Sept-11
Prior to appt as Executive Director	16,160	-	-	-	16,160	315.58	Mar-05	Mar-12
Prior to appt as Executive Director	21,301	-	-	-	21,301	281.67	Feb-06	Feb-13
Savings-related share option scheme
Prior to appt as Executive Director	3,851	-	3,851	-	-	244.74	May-07	Oct-07	451.25	9-May-07
	-	2,535	-	-	2,535	372.73	May-10	Oct-10
Mark Stevens
Savings-related share option scheme
Prior to appt as Executive Director	1,836	-	-	-	1,836	257.93	May-08	Oct-08
	-	1,267	-	-	1,267	372.73	May-10	Oct-10
Chris Willford
Savings-related share option scheme
	-	1,317	-	-	1,317	372.73	May-12	Oct-12
Chris Gillespie
Savings-related share option scheme
	1,006	-	-	1,006	-	371.66	May-09	Oct-09

Notes
The exercise of share options is subject to a performance condition related to the improvement of the Company's EPS.
No Executive Share Options have been granted since 2003.

Directors' executive incentive plan

	At 31 Dec 2006	Deferred shares awarded in year	Vested	Lapsed	At 31 Dec 2007	Award value (p) per share	Performance period ends	Vesting date	Performance conditions for matching shares	Market price on vesting (p)	Date of vesting
Steven Crawshaw	54,752	-	-	-	54,752	323.00	Dec-07	Feb-08	EPS growth
	61,338	-	-	-	61,338	470.75	Dec-08	Feb-09	EPS growth
	-	78,260	-	-	78,260	460.00	Dec-09	Feb-10	EPS growth
Robert Dickie	31,026	-	-	-	31,026	323.00	Dec-07	Feb-08	EPS growth
	23,791	-	-	-	23,791	470.75	Dec-08	Feb-09	EPS growth
	-	31,423	-	-	31,423	460.00	Dec-09	Feb-10	EPS growth
Roger Hattam	20,684	-	-	-	20,684	323.00	Dec-07	Feb-08	EPS growth
	18,056	-	-	-	18,056	470.75	Dec-08	Feb-09	EPS growth
	-	26,086	-	-	26,086	460.00	Dec-09	Feb-10	EPS growth
Mark Stevens	20,684	-	-	-	20,684	323.00	Dec-07	Feb-08	EPS growth
	18,056	-	-	-	18,056	470.75	Dec-08	Feb-09	EPS growth
	-	26,086	-	-	26,086	460.00	Dec-09	Feb-10	EPS growth
Chris Willford	32,926	-	-	-	32,926	470.75	Dec-08	Feb-09	EPS growth
	-	40,760	-	-	40,760	460.00	Dec-09	Feb-10	EPS growth
Chris Gillespie	24,783	-	-	24,783	-	470.75	Dec-08	Feb-09	EPS growth
	-	31,423	-	31,423	-	460.00	Dec-09	Feb-10	EPS growth

Notes
Deferred shares will vest at the end of the three year period. Matching shares will be awarded subject to the achievement of EPS growth equivalent to RPI plus 3 - 8%. The maximum matching share multiple will be three times the deferred amount of shares awarded in the year in respect of the bonus payable for the performance year ending 31 December 2006. For a full description see the Directors' Remuneration Report.

Directors' performance share plan awards

	At 31 Dec 2006	Awarded in year	Vested	Lapsed	At 31 Dec 2007	Award value (p) per share	Performance period ends	Vesting date	Performance conditions	Market price on vesting (p)	Date of vesting
Steven Crawshaw	84,990	-	45,248	39,742	-	305.92	Dec-06	Feb-07	Standard	426.55	6-Mar-07
	84,989	-	20,150	64,839	-	305.92	Dec-06	Feb-07	Stretch	426.55	6-Mar-07
Robert Dickie	80,904	-	43,073	37,831	-	305.92	Dec-06	Feb-07	Standard	426.55	6-Mar-07
	80,903	-	19,182	61,721	-	305.92	Dec-06	Feb-07	Stretch	426.55	6-Mar-07
Roger Hattam	24,516	-	13,052	11,464	-	305.92	Dec-06	Feb-07	Standard	426.55	6-Mar-07
Mark Stevens	19,612	-	10,441	9,171	-	305.92	Dec-06	Feb-07	Standard	426.55	6-Mar-07

Notes
Final awards under the Performance Share Plan ('PSP') were made in February 2004 to Executive Directors and other senior executives. Awards under the PSP will vest subject to outperforming similar financial services companies over the longer term, as measured by TSR relative to a comparator group. Details of the performance conditions on these awards can be found in the 2004 Report and Accounts.

On 31 December 2007, the closing mid market price of ordinary shares in Bradford & Bingley plc was 268.00p and the range during the year to 31 December 2007 was 254.00p to 481.75p.

Approved by the Board on 12 February 2008 and signed on its behalf by:

Louise Patten, Chairman of the Remuneration Committee