21-01-2008
Treasury proposes Northern Rock finance structure
News by Adfero for Simply Business - independent providers of public liability insurance, business finance, landlord insurance, buy-to-let mortgages & commercial mortgages.
The Treasury has announced a proposed financing structure that would enable a private sector company to take on Northern Rock.
According to the department, the structure - which the Treasury says "would only be available for proposals that would protect taxpayers' interests" - would allow private ownership and remove the need for temporary public ownership of the bank.
The Treasury put forward the structure on behalf of the Tripartite Authorities, with the concept involving Northern Rock raising funds from financial market investors - backed by a mixed pool of assets - to repay the loans from the Bank of England.
If the assets were not enough to fulfil the obligations, the Treasury would guarantee the payment of investors, it has announced. As well as ensuring the Bank of England loans are repaid as soon as possible, the Treasury has said the structure will have other benefits.
It would make the private sector at first risk for Northern Rock's success or failure, while finding a cost-effective solution for the bank. It would also enable the Treasury to benefit from some of the potential returns in exchange for the financial support offered.
The Treasury also reiterated that savers' money is "safe and secure".
According to Northern Rock, a private sector solution is "also the board's objective" and the bank has said it will work closely with the Tripartite Authorities to achieve this.
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