11 December 2012
December 2012 update
On 11 December 2012, the Government notified Parliament that certain Consumer Credit Act (CCA) regulated loans in the Northern Rock Asset Management (NRAM) portfolio had been identified where the loan documentation was not compliant with CCA requirements.
If you are an NRAM customer and would like further information on whether your loan could have been affected, please visit the NRAM website (opens in new browser window).
17 Novembr 2011
On 17 November 2011, the Chancellor announced the sale of Northern Rock Plc to Virgin Money. The deal represents an important step in returning public sector stakes in banks to the private sector. It creates a new credible competitor in the UK retail banking sector.
It is business as usual for Northern Rock customers, who will not have to take any action as a result of the announcement. Further, the entry of a new banking institution on the high street will enable customers to benefit from better value, choice and service.
The deal represents good news for Newcastle and the economy of the North East. Virgin Money have committed to:
- safeguarding jobs;
- making Newcastle the operational HQ for all of Virgin Money;
- maintaining and expanding the number of branches, including in Newcastle; and
- maintaining and extending support for the Northern Rock Foundation, which does valuable charitable work across the North East.
The deal completed on 1 January 2012, following European Commission (EC) merger clearance and Financial Services Authority (FSA) approval.
In September 2007, Northern Rock was affected by heightened turbulence in the financial markets, which threatened to undermine the bank’s ability to fund its operations. Following a run on the bank by retail depositors – the first for a UK bank for over 150 years – a loan of £27 billion was provided to Northern Rock by the Bank of England. The loan was later transferred to HM Treasury, in Summer 2008.
The previous Government also put in place guarantee arrangements for Northern Rock as a temporary measure to maintain financial stability. However, uncertainty in the marketplace made it difficult to attract potential buyers for Northern Rock. Consequently, in February 2008, Northern Rock was taken into temporary public ownership.
Following a comprehensive review of Northern Rock’s business strategy:
- In February 2009, it was announced that Northern Rock would be restructured into two separate companies: Northern Rock Plc, a new savings and mortgage bank, and Northern Rock (Asset Management), an asset management vehicle.
- In October 2009, the European Commission provided ‘state aid’ approval for the plan, and the company was subsequently restructured on 1 January 2010. State aid rules ensure that interventions by national governments do not distort competition or trade within the EU, and so help to promote a level-playing field across Europe for financial services.
- UK Financial Investments (UKFI) then became responsible for managing the Government’s stake in both companies.
- In March 2010, it was decided that Northern Rock (Asset Management) and Bradford & Bingley would be integrated under a single holding company, UK Asset Resolution, which is wholly owned by the Treasury.
As part of the process to restore Northern Rock Plc to independence, the Treasury removed the temporary guarantee arrangements for Northern Rock Plc’s retail deposit customers in May 2010. Customers continue to have the first £85,000 of their total deposit protected by the Financial Services Compensation Scheme (FSCS), just like other banks. In November 2010, the guarantee arrangements for Northern Rock Plc’s wholesale liabilities also ended.
The Government is committed to advancing a strategy to return Northern Rock Plc to the private sector. UKFI has been charged with developing and executing the sale, and will make recommendations to the Government based on value for the taxpayer, and taking into account financial stability and competition. The business of Northern Rock (Asset Management) will be gradually wound down, so it does not accept any new business or make any new loans.
Events at Northern Rock, beginning in 2007, marked the first episode of the financial crisis for the UK. This was followed by a second phase in the crisis, involving extensive Government intervention and recapitalisation of the banking sector.
For detailed information on Northern Rock, the following material is available:
Northern Rock guarantees
Northern Rock: Transfer Order & other information
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