As previously confirmed, the bank will be split into two separate companies – Northern Rock plc and Northern Rock Asset Management plc.
Northern Rock plc will be a new savings and mortgage bank that will service all customer £19bn savings accounts amd around £10bn of mortgages. It will offer new savings products and mortgage lending and will hold certain wholesale deposits.
The Asset Management company will hold and service the majority of the existing residential mortgage book valued at around £50bn. It will be regulated by the FSA as a mortgage provider and not a deposit taker, though it will not offer any new mortgage lending.
On the transfer date, the bank expects that over 90 per cent of the mortgages held by Asset Management will be fully performing and not in arrears. This company will hold the Government loan, all unsecured loan accounts and Northern Rock’s outstanding wholesale funding and subordinated debt.
The Government loan will increase by £8bn to provide cash to be transferred to the new bank to support its retail deposit book and new lending.
Northern Rock customers will not have to take any action.
Northern Rock expects the process to be complete on January 1 2010.
Chief executive Gary Hoffman says:“Today is a very important step towards completing the legal and capital restructure of Northern Rock into two separate companies on 1 January 2010.
“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.
“I am pleased with the progress to date and all of the hard work colleagues are doing behind the scenes to ensure this is a smooth process for customers.”