Northern Rock – Virgin look to be taking over
Posted by markharrison on November 25, 2007
It is being reported that, as of 18:51 this evening, the Northern Rock board have recommended, and the Treasury have given their approval for Virgin Money to take over Northern Rock.
Northern Rock are expected to make the announcement officially in the morning.
It is likely that the Treasury will remove the “100% guarantee” to depositors that they have offered – apparantly, they have promised to give three months’ notice to depositors if they do so. This is the guarantee that people with Northern Rock savings accounts would get their money back even if the bank went under.
Once this happens (as is likely, no matter who takes over the bank), this should leave depositors still with some protection from the Financial Services Compensation Scheme, which guarantees:
- The first £2,000 of money from any depositor
- 90% of the next £33,000 from any depositor
It’s currently estimated that we, the taxpayers, have lent Northern Rock £25,000,000,000 (25 Billion pounds) in “Loans” from the Government. The Virgin scheme is expected to repay £11,000,000,000 of this immediately, and take out the rest of the loans on “normal commercial terms”.
The Government have, apparently, ruled out Nationalising the bank, which means that shareholders – the OWNERS of the bank who have to approve the deal – effectively have a choice between accepting the Branson bid, or letting the Administrators take over – which could potentially leave them far worse off.
Well done to Sir. Richard for stepping in here – I’ve been critical of him in the past for trying to make free publicity out of things like the Concorde sales, but what he’s done here seems to be good business as well as good publicity.