Europe gives green light for Northern Rock split
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The European Commission has approved Government plans to split Northern Rock into a ‘good’ and ‘bad’ bank.
In June, Northern Rock revealed its plans to split the business between two new entities, ‘BankCo’ and ‘AssetCo’. BankCo would be made up of deposits, branches and unencumbered mortgage assets. The second, AssetCo, would be made of the Granite master trust, all covered bonds, the Northern Rock mortgage book and all other wholesale instruments. It will also hold the Government loan on its books.
Now the EU Commission has given the plans the go ahead. The process will be led by UBS banker Robin Budenberg, who has been named as chief executive of UKFI, the body which owns all Government acquired banking interests.
Northern Rock says the restructure will strengthen the capital and liquidity position of the bank significantly, and “offers value for money to taxpayers by adopting different regulatory frameworks to create a capital efficient structure”. The bank also says the restructure will enable Northern Rock to be an active participant in the UK mortgage market once again.
It says the proposed legal and capital restructure is expected to complete by the end of 2009, subject to FSA approval.
Northern Rock chief executive Gary Hoffman says: “Receiving approval from the European Commission is an important and positive step for Northern Rock, our customers, employees and the Government. We are making good progress towards achieving the legal and capital restructure and will continue to work with the Government and the FSA to achieve the necessary approvals. We are delivering on our promises.”
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