Northern Rock takes another step towards independence
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Issued 24 February 2010
An important milestone has been reached in Northern Rock’s return to
independent, commercial strength with notice given today for the end of the
special guarantee for the bank’s retail deposits.
The Treasury has announced that the guarantees for retail deposits in
Northern Rock plc will be lifted three months from today on close of business,
24 May. The guarantee for wholesale borrowings of Northern Rock plc, to the
extent it relates to sums which are attributable to retail deposits made with
Northern Rock (Guernsey) Limited, will also be lifted at the same time. Fixed
term deposits in existing accounts will be guaranteed to maturity. Today’s
announcement follows the successful restructuring of the bank on 1 January.
Financial Services Secretary to the Treasury Paul Myners said:
“The Government’s actions to stabilise Northern Rock protected the savings of
millions of families and the jobs of thousands of workers. The guarantee of
retail deposits was a vital step that restored confidence in Northern Rock’s
operations when its customers were worried about its soundness.
“Over the last two years, we have worked to get the bank back to financial
health. We have taken a number of important steps, most recently to divide the
bank into a retail business that will be sold back to the private sector in due
course, and an asset management company that will remain in Government
ownership. Our goal is to see the taxpayer get a good return on its investment
in the bank and for Northern Rock to focus on providing an excellent service to
its customers.
“Today’s announcement shows how far we have come. Depositors can have
confidence in Northern Rock.”
After the guarantee is lifted every Northern Rock retail customer will
continue to have the first £50,000 of their total deposit protected by the
Financial Services Compensation Scheme (FSCS), whether their deposit is
fixed-term, non-fixed term or a combination of both. This is the same level of
protection that is provided for retail customers of all banks and building
societies in the UK. Customers of Northern Rock (Guernsey) will continue to
benefit from the Guernsey Banking Deposit Compensation Scheme. The guarantee
applying to Northern Rock’s retail deposits was put in place as a temporary
measure during a period of unprecedented instability in the financial markets.
It was never intended to be permanent. The Government had undertaken to give at
least three months notice before lifting the guarantee as it has today.
Throughout the financial crisis, not a single retail depositor with a UK bank
has lost any of their savings.
Today’s announcement does not affect the status of wholesale deposit
guarantees for Northern Rock, except guarantees covering certain wholesale
borrowings of Northern Rock plc attributable to retail deposits made with
Northern Rock (Guernsey). Notes for Editors - Legal Notice
This announcement concerns those guarantee arrangements announced on 8
December 2009 in respect of retail deposits of Northern Rock plc and is notice
of the termination of those guarantee arrangements as set out below. This
announcement also relates to the guarantee arrangements for certain wholesale
borrowings of Northern Rock plc.
The guarantee arrangements in respect of all retail deposits held in existing
accounts with Northern Rock plc which are not fixed term retail deposits will
terminate with effect from 5 p.m. on 24 May 2010.
The guarantee arrangements in respect of fixed term retail deposits held in
accounts with Northern Rock existing at 8 a.m on 24 February 2010 will terminate
on the maturity of the relevant fixed term. In respect of any fixed term retail
deposit whose maturity is renewed or extended after 8 a.m on 24 February 2010,
the guarantee arrangements in respect of that fixed term retail deposit will
terminate on the date of maturity of that deposit existing prior to its renewal
or extension.
The guarantee arrangements do not apply to any retail deposit made into
accounts with Northern Rock where those accounts were not in existence 8 a.m on
24 February 2010.
The guarantee arrangements in respect of amounts deposited with or advanced
to Northern Rock plc by Northern Rock (Guernsey) Limited (to the extent such
amounts are funded by retail deposits held with Northern Rock (Guernsey)
Limited) shall also terminate with effect from 5 p.m. on 24 May 2010.
The termination of the guarantee arrangements in respect Northern Rock plc
referred to in this announcement does not affect any of the other guarantee
arrangements announced on 8 December 2009 in respect of Northern Rock plc or
Northern Rock (Asset Management) plc.
On 1 January 2010, the Northern Rock plc Transfer Order 2009 split the
business of Northern Rock between two separate legal entities:
* a new company, now called ‘Northern Rock plc’, which is regulated by the
Financial Services Authority, carries on Northern Rock’s retail and wholesale
deposit business (other than in respect of certain wholesale deposits held on
behalf of Northern Rock’s Granite securitisation and covered bond programme) and
which holds a proportion of Northern Rock’s unencumbered mortgages and its
mortgage origination and servicing platform; and * the entity formerly called
Northern Rock plc and now re-named ‘Northern Rock (Asset Management) plc’, which
retains the balance of Northern Rock’s mortgage book (including mortgages
allocated to the Granite securitisation and covered bond programme), the
Government loan, its other borrowings, derivatives and certain wholesale
deposits held on behalf of its Granite securitisation and covered bond
programmes.
The guarantee arrangements in respect of the retail deposits of Northern Rock
plc are set out in Technical Notes 2 to 4 and 11 of the Chancellor of the
Exchequer’s statement of 8 December 2009 concerning guarantee arrangements
relating to Northern Rock plc.
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