Chairman to reveal plans for the Rock
Mar 17 2008 by Andrew Mernin, The Journal
THOUSANDS of Northern Rock workers in the region are waiting to hear their new boss’s restructuring strategy for the bank – due to be tabled today.
Ron Sandler, the man charged by the Government with running the Rock as a nationalised company, is expected to give his recommendations to the Treasury today.
Reports yesterday claimed he is planning to announce the culling of vast portions of the Rock’s business – a move which could see thousands of North East jobs slashed.
The new chairman is also expected to cut the bank’s lending book and make suggestions on how to shore up its lending base.
Today also marks the end of the six-month deadline imposed by the European Commission, after which the bail-out of the Rock may be in breach of EU state funding rules.
However, Chancellor Alistair Darling will today issue a proposal, which is expected to be accepted, to continue giving state aid to the bank.
A Northern Rock spokesperson yesterday confirmed that the plans for the future of the company will be unveiled today, with a further announcement to be made by the firm later this week.
Newcastle Central MP Jim Cousins said: “This is a very important moment and a choice has to be made about whether this is a new beginning for Northern Rock or the beginning of the end.
“Unless Northern Rock is kept as a good solid business which it can be, then I don’t see how the taxpayer will ever get its money back.”
Last week speculation rose that Mr Sandler could be looking to sell off parts of the Rock following the Government’s Budget forecast that £14bn of the estimated £25bn lent to the bank will be paid back in the first year.
One option for the Rock to avoid shrinking in size could be to seek external funding.
However Ian Shepherdson – a former Wall Street and City economist now living in Newcastle – believes this could prove difficult given the current climate of global financial turmoil.
He said: “Right now banks that have a history of difficulties are going to find it very difficult to raise external funding as demonstrated by Bear Stearns in the US on Friday.”
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Danes complain as rates are trumped
AS well as coming under-fire from other High Street lenders here, the Northern Rock regime now faces opposition in Scandinavia.
The Danish Bankers’ Association has written to the European Commission claiming that the Rock’s Government guarantee gives it an unfair advantage over other banks.
The lender has an internet savings business in Denmark that is offering 5% interest, whereas the country’s banks lend to each other at 4.63%. The Rock says deposits are 100% guaranteed by the UK Government.
Jorgen Horwitz of the Danish Bankers’ Association, said: “Of course we support free competition and the liberalisation of financial services. But it is also important that competition is on an equal market basis.”
