Britain advised to consider sale of Northern Rock: report

29th May 2011, Comments 0 comments

The British government has been advised to consider selling nationalised lender Northern Rock, rather than float it on the stock market or return it to the mutual sector, a report said Sunday.

UK Financial Investments (UKFI), the body which oversees publicly owned stakes in banks acquired during the financial crisis, made the recommendation to finance minister George Osborne last week, said the Observer newspaper.

Deutsche Bank, which carried out a review of options for UKFI, is thought to have concluded that a sale would be more cost effective for the taxpayer than a flotation or a return to the mutual sector, said the paper.

A price tag of £1.4 billion (1.6 billion euros, £2.3 billion) is regarded as a starting point for bidders, it added.

The finance ministry refused to confirm the precise recommendations made by UKFI.

"As part of the ongoing process of providing advice on strategic options for Northern Rock, UKFI is recommending that options for returning Northern Rock to the private sector are explored," said a spokesman.

"The chancellor (Osborne) will take a decision on when and how in due course."

A government source stressed however that an imminent decision was unlikely.

Unions had been pushing for Northern Rock to be re-mutualised -- turned into a building society again -- whereby it would be owned by the bank's depositors.

Last week, Richard Branson's Virgin Money expressed an interest in buying parts of Northern Rock, as well 600 branches to be sold by Lloyds, to form a new high street bank.

Northern Rock was last year broken into two parts, "good" and "bad" banks, following its nationalisation in early 2008. Only the "good" bank, Northern Rock Plc, would be sold off.

The lender was plunged into crisis in mid-September 2007 when its exposure to the credit crunch forced it to seek emergency assistance from the Bank of England, sparking the first run on a British bank in recent history.

© 2011 AFP

0 Comments To This Article