Northern Rock to be sold
Northern Rock is up for sale, chancellor George Osborne has confirmed.
After the run on the bank in 2007 – the first for 150 years – the bank was nationalised as the sub-prime mortgage crisis took hold. But in his Mansion House speech last night, the chancellor said he was selling the bank "on behalf of the British taxpayer" and looking for a single buyer.
"Images of the queues outside Northern Rock branches were a symbol of all that went wrong, and its chaotic collapse did great damage to Britain's international reputation," he said. "Its return now to the private sector would help to rebuild that reputation. It would be a sign of confidence and could increase competition in high street banking."
Osborne said the sale would get at least some of taxpayer money back and that the sale process will be open and transparent and in line with state aid rules.
"Any interested parties can bid for it, including mutuals, which this government is actively committed to promoting," he said.
When the bank was privatised it was split in two – the good bank, which included customers savings and its branch network, and the bad bank called Northern Rock Asset Management, which contained toxic loans. The bad bank is not for sale and will be retained by the government.
In this speech, Osborne also said that the British economy was recovering.
Will taxpayers get all their money back?
Reports are claiming the bank will sell for around £1 billion, some £4 million short of the cash taxpayers paid to bail it out. The retention of the asset management arm may explain the shortfall.
Who will buy it?
Osborne says the sale is open to "all parties" and the names of potential buyers are already being bandied about. Some reports claim building societies Yorkshire and Coventry are to bid, meaning Northern Rock would become remutualised. Virgin Money is another name in the hat.
What about the other government-backed banks?
It is thought that the chancellor will announce the sales of stakes in Royal Bank of Scotland and Lloyds Banking Group in 2012.
All sub-prime financial products are aimed at borrowers with patchy credit histories and the term typically refers to mortgage candidates, though any form of credit offered to people who have had problems with debt repayment is classed as sub-prime. Depending on the lender’s own criteria, sub-prime can apply to borrowers who have missed a few credit card or loan repayments to people who have major debt problems and county court judgments (CCJ) against their name. To reflect the extra risk in lending to people who have struggled in the past, rates on sub-prime deals are typically higher than for “prime” borrowers.