Northern Rock to be nationalised
Updated on 17 February 2008
The Chancellor Alistair Darling has made a dramatic announcement that Northern Rock is to be nationalised.
He said the Government was forced to act after failing to attract private bids that would have given sufficient protection to taxpayers, who are now propping up the bank to the tune of £55 billion.
Mr Darling said: "The Government has now completed it review of the two detailed proposals on the table and we have made our choice after considering all proposals.
"In the current market conditions we do not believe the two proposals deliver sufficient value for money for the taxpayer, so the Government has decided to bring forward legislation to bring Northern Rock into a temporary period of public ownership.
"We have done so after full consultation with the Bank of England and the Financial Services Authority.
"Northern Rock will continue operating as a bank on a commercial basis. It will be open for business as usual tomorrow morning and thereafter.
"Importantly, savers' and depositors' money remains safe and secure. The Government guarantee arrangements I announced last year remain in place and will continue to do so. Borrowers will continue to make their payments in the normal way."
The Government will take the business from its current shareholders into public ownership.
It will be run at arm's length and the former Lloyd's of London chief executive Ron Sandler has been chosen as executive chairman.
Emergency legislation will be rushed through Parliament and a Government-appointed arbitration panel will decide on a fair level of compensation for Northern Rock's shareholders when the move is made, although this is likely to pave the way for a legal fight if investors are unhappy with what is offered.
Bank of England Governor Mervyn King recently predicted that a nationalised Northern Rock will probably "pass very quickly to a new management team and, ultimately, to a new ownership team".
