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Britain's finance minister, Alistair
Darling, listens to a question at a news conference at the Treasury, in
central London Feb. 17, 2008. Britain will nationalise ailing mortgage
lender Northern Rock until financial markets stabilise and it can be
returned to the private sector, finance minister Alistair Darling said on
Sunday. (Xinhua/Reuters Photo)
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LONDON, Feb. 17 (Xinhua) -- British troubled bank
Northern Rockis to be nationalized, British Finance Minister (Chancellor of the
Exchequer) Alistair Darlilng announced Sunday.
"Northern Rock is to be brought under temporary
public ownership," Darling said in a statement at a press conference at 11
Downing Street.
"The move meets the objective of protecting
taxpayers' money. Private proposals did not deliver sufficient value for money,"
he said.
Neither of the two private proposals delivered
"sufficient value for money to the taxpayer," Darling said.
Sir Richard Branson's Virgin Group and a rival
in-house management team had both tabled offers for the lender.
"Myself and the prime minister feel this is the right
option," the Chancellor said, adding "This is a temporary measure. The long-term
future of the bank must lie in the private sector."
He said "market conditions will improve" and it would be wrong to "abandon the asset."
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New Executive Chairman of Northern Rock bank Ron Sandler speaks to journalists during a news conference at their headquarters, Northern Rock House, in Newcastle northern England Feb. 18, 2008. Embattled mortgage bank Northern Rock could take "some years" to repay 25 billion pounds ($48.7 billion) of government loans, its new executive chairman, Ron Sandler, told reporters on Monday. (Xinhua/Reuters Photo)
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Darling said "confident taxpayer will get back every
penny paid by the Bank of England (the central bank)."
Nationalization will be pushed though parliament with
emergency legislation on Monday. Shares in Northern Rock will be suspended on
Monday morning.
Under nationalization rules, shareholders will be
offered compensation for their holding, at a level set by a Government-appointed
panel.
Investors could begin legal action if they are
unhappy with the amount offered.
The Treasury has reportedly already recruited the
former boss of the Lloyd's of London insurance market, Ron Sandler, to lead
Northern Rock. Sandler is widely regarded as having restored confidence in
Lloyd's after its years in financial disarray.
Northern Rock got itself into financial difficulties
last year because its business model left it ill-prepared for the global credit
crunch.
It was forced to ask the Bank of England for
emergency funding, triggering the first run on a British bank in nearly 150
years as worried savers queued outside branches to withdraw deposits.
British taxpayers are now subsidizing the bank in
loans and guarantees to other lenders to the tune of about 55 billion
pounds(over 108 billion U.S. dollars).
This time last year, the bank was worth around 5.3
billion pounds. It is now worth just 375 million pounds.
Chairman of the Commons Treasury Select Committee
John McFall said that he welcomed the Government's decision to nationalize,
saying "They have explored every avenue. At the end of the day the biggest issue
is the safeguarding of taxpayers' money. If nationalization saves that money,
that has to be the correct step in the long term."
Liberal Democrat treasury spokesman Vince Cable said
that the right decision had been taken, though "belatedly," and that the
government should have walked away from the prospect of a private takeover some
time ago.
Reacting to news of the nationalization, Robin Ashby
from Northern Rock Small Shareholders slammed the government's decision and said
he was "shocked" and "appalled."
He said "Britain's reputation as a financial center
will be very badly damaged as a result of this decision."
It would now appear that neither Virgin nor the bank's own management team were prepared to offer this concession.
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Buildings are reflected in the windows of Northern Rock's Leicester branch, central England in this Feb. 4, 2008 file photograph. British troubled bank Northern Rockis to be nationalized, British Finance Minister (Chancellor of the Exchequer) Alistair Darlilng announced Sunday. (Xinhua/Reuters Photo)
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UK unveils Northern Rock rescue plan
LONDON, Jan. 21 (Xinhua) -- British Chancellor Alistair
Darling on Monday outlined a rescue plan for troubled mortgage lender Northern
Rock.
Under the plan, Northern Rock's 25 billion pounds (49
billion U.S. dollars) in loans from the Bank of England in September will be
converted into government bonds intended for a private sale. Watch
Brown: escalation of Northern Rock
crisis prevented
LONDON, Dec. 19 (Xinhua) -- British Prime Minister Gordon Brown
said here Wednesday that the country has prevented the escalation of the
Northern Rock crisis.
"I guarantee the loans made to Northern Rock are
backed by its assets," Brown told a joint press conference with Chancellor
Alistair Darling. Full story
Northern Rock crisis sends shivers
across Britain
LONDON, Dec. 13 (Xinhua) -- Britain is a country which has
long prided itself on having one of the world's best regulated and managed
financial markets. However, the eruption of a banking crisis in 2007 seems to
have pricked the bubble.
In mid-September, police were even called to break up
panic queues outside branches of the Northern Rock bank as customers rushed to
withdraw their money following news that the bank, Britain's fifth biggest
mortgage lender, was running out of ready money. Full story
EU approves Britain's rescue aid for
Northern Rock
BRUSSELS, Dec. 5 (Xinhua) -- The European Commission
on Wednesday approved Britain's rescue aid for troubled mortgage lender Northern
Rock to get out of the current difficulties stemming from the global credit
crunch.
The commission, which enjoys power to ensure that
state aid does not distort competition and trade in the European Union (EU),said
the measures comply with EU rules on rescue aid. Full story
