Northern Rock - Temporary Public Ownership

BUSINESS AS USUAL
Temporary Public Ownership: What It Means For You
The Government has announced its intention to take Northern Rock into temporary public ownership.
The Government believes that this is in the best interests of customers and taxpayers.
Customers are not affected by this change.
Your savings with Northern Rock continue to be safe and secure, protected by the Government guarantee arrangements.
The terms and conditions of your mortgage, savings and other products remain unchanged.
All branches, call centres and other operations remain open for business as usual.

Here is what customers can read on the homepage of Northern Rock website.

The story started on September 2007 when Northern Rock received a bail out from the Bank of England, following the problems in the credit markets caused by the US Subprime mortgage financial crisis.

On 22 February 2008 the British government announced the nationalisation of Northern Rock after it had acquired all the bank's shares. Mr Darling said the government had rejected two private takeover bids for the bank from Richard Branson's Virgin Group and Northern Rock's own management team because they both do not offer "sufficient value for money to the taxpayer". According to him, this temporary public ownership is the best solution to safeguard taxpayer's money and for the Bank of England to get back the ₤26 billions lent to Northern Rock. This is a temporary measure and the aim is that the bank return to private sector once the market conditions improve and the value of the bank grows.

But this decision marks the first official nationalisation since the 1970's and forces the British government to deal with several critics: The shareholders criticize this measure because they will receive only a little compensation for their shares which were suspended on Monday. George Osborne, the shadow chancellor, underlined that the nationalisation will allow Northern Rock to borrow and lend more cheaply than its rivals because of the government backing. And finally, the rivals bankers believe that the government should limit his action to ensure taxpayers do not lose their money.

Now the Northern Rock's new management team headed by Ron Sandler will draw up a business plan for the bank to reinvent Nothern Rock as "a profitable, vibrant and sustainable business" with a view to selling it to private sector.