Restructure sees Northern Rock split into two divisions
Nationalised Northern Rock is to be split into two divisions – a deposit bank and a mortgage platform.
The crisis-torn bank collapsed at the onset of the credit crunch in autumn 2007 after savers staged a nationwide run on the bank. It was then nationalised in February 2008.
However, following European Union (EU) approval, it has now been confirmed that the bank will see a new “BankCo” – which will hold its savers money, carry out new lending, and retain some of its existing mortgages.
Meanwhile, “AssetCo” is set to hold the balance of the existing residential mortgage book and this division will be responsible for repaying the outstanding £8.9 billion of its £26.9 billion loan.
The remainder of the loan is expected to be repaid by the end of 2010 since the repayment plan has been slowed down in order to concentrate on new lending.
Earlier this year, the Government announced that Northern Rock would increase mortgage lending by up to £14 billion over the next two years in a move aimed at building “a high quality mortgage book and viable bank for sale”.
Meanwhile, Gary Hoffman, the bank’s chief executive said: “We are confident that our plan offers the best way forward, meets all State Aid requirements and offers significant benefit for consumers and value for taxpayers as we position Northern Rock for a return to private ownership.”