Partner Article

Compensation unlikely for Northern Rock shareholders

Former shareholders of Northern Rock are unlikely to receive any compensation as a result of nationalisation, according to a new report.

Andrew Caldwell, an independent valuer, of BDO, has warned that there would not have been anything left for shareholders had Northern Rock had to pay back more than £25b Bank of England loans last year.

The assessment also included the assumption that the bank had fallen into administration rather than being rescued by the taxpayer in February of last year.

He explained: “There is no value in the shares or rights as at the valuation date and therefore no compensation is payable to affected parties.”

The valuation comes as final details of the plan to split Northern Rock into two separate entities were published in the wake of European approval of the break-up of the business.

Northern Rock will be a new savings and mortgage bank, active in the market place and offering new accounts.

The remaining business will become Northern Rock (Asset Management), holding £50b of the lender’s existing residential mortgage book – 90% of which are expected to be fully performing and not in arrears by the transfer date of January 1 2010.

Retail deposits at the new bank will continue to be guaranteed by the government and all savings customers will have their accounts automatically transferred on January 1.

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