Up to three potential rescuers for Northern Rock are expected to submit formal bids ahead of the government's deadline for firm offers for the bank.
Sir Richard Branson's Virgin Group says it will bid, and investment fund Olivant and the bank's management are also expected to put forward proposals.
The government wants a private sector buyer for the troubled bank, which has needed £25bn of Bank of England loans.
However, it has not said when it will announce which option it has chosen.
'Strong bank'
Sir Richard has already confirmed that Virgin aims to meet the deadline, and is said to be the frontrunner to take on the bank.
"We believe we will create a very strong bank in the future and we hope to make sure the taxpayers will get all their money paid back," he said.
Under a sale to a private buyer, the government would turn the £25bn of Bank of England loans - essentially taxpayers' money - into bonds, which would then be sold to investors.
Northern Rock got itself into financial difficulties because its business model left it ill-prepared for the global credit crunch.
Cheap funds
Unlike the great majority of UK banks, Northern Rock relied upon borrowing funds from the wholesale money markets to fund its mortgage business, rather than the usual method of using savers' deposits.
Yet when the credit crunch hit, Northern Rock suddenly found it could not secure the cheap funds it needed, as credit was either unavailable or markedly more expensive.
As the first emergency loan from the Bank of England was announced, thousands of Northern Rock savers rushed to withdraw their funds, before the government's pledge to guarantee all savings.
A recent report into the collapse of Northern Rock by the House of Commons Treasury Committee was highly critical of the UK financial watchdog, the Financial Services Authority (FSA).
While the report said Northern Rock's senior managers had been most at fault, it said the FSA had been guilty of a "systematic failure of duty" in not preventing the bank's "reckless" business plan.
Source
http://news.bbc.co.uk/2/hi/business/7225030.stm
|
