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‘Bad banks’ of Rock and B&B to merge

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by Kay Mitchell

It has been announced today the ‘bad banks‘ of Northern Rock (NRAM) and Bradford and Bingley (B&B) are set to merge.

The move is designed to cut costs and bring greater returns for the taxpayer.

The UK Financial Investments (UKFI), the body which was set up at the height of the financial crisis to oversee taxpayers’ interests in High Street banks, did not provide a timescale for the merger but said it would be “an extensive process”.

On 1st January, Northern Rock was split into two divisions - a “good bank” of profitable assets and “bad bank” of toxic debts. The bad bank is known as Northern Rock Asset Management (NRAM).

B&B, meanwhile, saw its savings base and branch network acquired by Spanish banking giant, Santander.

At the time, B&B’s billion pound loan book, including its mortgages, was nationalised.

The two bad banks are set to be brought under one holding company with a single management team but the UKFI said the change will not affect customers of the two banks.

However, while the move is expected to be cost efficient, it could also lead to job losses.

Keith Morgan, head of wholly-owned investments at UKFI, said in a statement: “We believe that bringing (B&B and NRAM) together under a single holding company with a common management team is the natural outcome and the right solution to maximise value for the taxpayer.”

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News posted: March 24, 2010

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