Northern Rock sale faces Treasury veto

Northern Rock sale faces Treasury veto

Treasury is likely to veto any sale of Northern Rock if it fails to meet market value

Chancellor Alistair Darling told the House of Commons yesterday the
Government, as a major creditor and investor in Northern Rock’s future, would
have to approve or veto any sale of the beleaguered bank.

His
ministerial
statement
in Parliament came as the bank’s share value dropped 21.4% to a
new low of 104.2p after
Northern
Rock
revealed all offers, reportedly counting 10 since Friday’s deadline for
expressions of interest, had so far been ‘materially below’ the bank’s closing
market value.

Facing the prospect of placing Northern Rock in administration, nationalising
the bank or running foul of EU state-aid rules, Darling unveiled a three-point
approach:

‘First, to protect the interests of the taxpayer,’ he said. ‘Substantial sums
have been lent and this money has to be repaid at an appropriate time and rate.
The Government will consider proposals with a view to reaching the best outcome
for the public purse.

‘Second, to protect depositors. It is essential to do everything we can both
to safeguard their interest and to maintain the service provided to them. And
third, to maintain wider financial stability.’

Further reading:

Rock FD survives board clear out

Northern Rock denies its funding model was risky

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