Northern Rock split affects savings accounts
09 December 2009 11:47:10
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| Savings accounts are to be held in the 'good bank'. |
The institution, which nearly collapsed with the onset of the credit crunch in 2007 and was fully nationalised in February 2008, is to restructure on January 1st 2010.
According to the update, existing low-risk assets such as retail savings accounts are to be put into a "good bank" which will still be known as Northern Rock.
The bank will operate as normal and will continue to offer new accounts to customers.
It is hoped that the "good bank" will eventually be sold back into the private sector.
Meanwhile, the government will hold on to risky loans currently held by Northern Rock in a "bad bank", following the split.
Assets held by this organisation, which is to be known as Northern Rock (Asset Management), will include around £50bn of outstanding mortgages.
Earnings from the "bad bank" will be used to repay government loans previously made to Northern Rock.
Financial services secretary Paul Myners said: "On [January 1st] Northern Rock will take a further step towards an independent future."
He added: "Now we can prepare the bank for its restructuring and ensure that it plays its full role in supporting the recovery of the economy."
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