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EU 'to back Northern Rock split'

The European Union is set to approve plans for nationalised bank Northern Rock to be split in two, paving the way for a partial sale.

One business, to be known as the “good bank”, would hold savers’ money, carry out new lending, and hold some existing mortgages.

A second “bad” bank would be set up to hold the rest of the mortgages and repay outstanding government loans.

The chairman of the Treasury Committee, John McFall, said he thought the decision to split Northern Rock was a good one.

“It provides a healthy bank, and it provides confidence to the market and it’s a good signal.”

But the Liberal Democrat Treasury spokesman Vince Cable said he was “deeply suspicious” of the move.

“I fear that what might come out of this is that the better bits of the bank will be sold off and sold off cheaply to a private buyer, and the rubbish - the really bad irresponsible loans, the 125% mortgages - they will be left with the taxpayer which will eventually accrue very large losses,” he said.

If the EU does approve the split of Northern Rock, the government will begin exploring sale options.

While the “bad bank” is likely to remain in government hands for some time, a deal for the rest of the business could potentially be completed before the general election next year.

Among those named as potential buyers of the “good” bank are Virgin and National Australia Bank - owner of the Clydesdale and Yorkshire Bank.

This was posted in Bdaily's Members' News section by Ruth Mitchell .