Government announces solution for Northern Rock
A new financing solution for Northern Rock has been announced today by HM Treasury, the Bank of England and the Financial Services Authority (FSA).
The new financing structure will see the bank raising funds from stock market investors in the form of bonds, backed fully by the Treasury. However, Northern Rock will have to cover as much of any losses as it can, in order to protect taxpayer’s money. If this arrangement goes ahead, Northern Rock will pay a fee for the Treasury guarantee.
According to a statement by the Tripartite Authorities (the Treasury, Bank of England and the FSA), this solution would ensure all previous loans from the Bank of England are repaid in full, with interest, as soon as the funds are raised.
The Government is still considering the options for the bank, with two private sector bids on the cards, as well as the possibility of nationalisation. This new solution would be available in the event of any private sector solution, but only those that protect taxpayers’ interests, and meet the Tripartite Authorities’ objectives of financial stability and the protection of consumers.
A statement released by Northern Rock this morning, said: “The Board welcomes the Tripartite Authorities’ confirmation of their preference to reach agreement on a private sector solution for the company which meets the Tripartite’s previously stated objectives to protect taxpayers, consumers and to promote financial stability.
“The Board also notes the Tripartite Authorities’ reaffirmation that the existing guarantee arrangements for depositors remain in place. Savers’ money remains safe and secure in Northern Rock.”