Rock restructure gets go-ahead
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The European Commission has approved a state aid package for Northern Rock which will see the nationalised lender separate its assets into two companies.
The commission says it is satisfied that the package of measures proposed by Northern Rock will allow what has been widely dubbed the good bank to continue while enabling the orderly liquidation of the bad bank without threatening competition.
Neelie Kroes, competition commissioner at the EC, says: “The failure of Northern Rock would have had detrimental effects on the UK mortgage market and the stability of the UK economy.
“Structural changes including the splitting of the bank into two entities and a significant reduction of its market presence will allow it to become viable and limit the distortion of competition.
She adds: “This decision shows the European state aid rules provide an appropriate framework to allow support for the sustainable restructuring of banks.” Northern Rock says now the restructure has been approved it can strengthen its liquidity, allowing it to become a more active participant in the market.
The restructure is expected to be a done deal by the end of the 2009, subject to approval by the Financial Services Authority.
The lender says customers will be unaffected and kept informed on the progress of the split.
Gary Hoffman, chief executive of Northern Rock, says: “Approval from the EC is a positive step for our customers, our employees and the government.
“We are making good progress towards legal and capital restructuring and will work with the government and the FSA to achieve the necessary approvals.”
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