Date set for Northern Rock split

| December 8, 2009
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It was recently confirmed that crisis-torn Northern Rock would be split into two, after receiving the necessary approval from the European Union (EU).

1 January 2010 is the date that has been agreed for the Rock to be split into two divisions – a “good bank” of profitable assets and “bad bank” of toxic debts.

The “good bank” will be known as Northern Rock plc, and will hold its savers money, carry out new lending and retain some of its existing mortgages.

Meanwhile, the “bad bank” will be called Northern Rock (Asset Management) plc and will hold the bulk of the mortgage book (currently around £50 billion) and will be responsible for the repayment of the outstanding Government loans.

In order to support the move, the Government will increase its loan to Northern Rock from £15 billion to £23 billion so that the good bank has an extra £8 billion to back the deposits and to fund new lending.

Meanwhile, customers have been informed that they need not take any action and the terms and conditions of their deals will not change.

Chief executive Gary Hoffman comments: “We want this to be a seamless process for our customers and they do not need to take any action.”

“We will be writing to them in early January confirming which company holds their account – but we have already confirmed that all savings accounts will be in the new bank,” added Mr Hoffman.

Northern Rock 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.

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