Britain's parliament has passed legislation allowing the government to nationalise troubled bank Northern Rock, which was rocked by a credit crunch six months ago.
LONDON, Jan 21 (Reuters) - Britain's parliament passed
legislation on Thursday allowing the government to nationalise
Northern Rock <NRK.L>, five months after the bank became a
high-profile casualty of the global credit crunch.
The Banking (Special Provisions) Act allows orders to be
issued for the transfer of all shares in Northern Rock to the
government and for an independent auditor to calculate how much
money shareholders should receive.
Britain's fifth-largest mortgage lender was rescued by loans
of about 25 billion pounds from the Bank of England in September
and the government also stepped in to guarantee deposits.
Prime Minister Gordon Brown's government said the collapse
of Northern Rock would have posed risks to the wider financial
system and that saving the bank was therefore essential.
The government initially sought a private buyer but rejected
two offers last weekend and decided to nationalise the bank
instead. The legislation was then pushed through parliament.
Brown has been criticised by the opposition for the way the
government has handled the Northern Rock issue.
He trails Conservative Party leader David Cameron in opinion
polls and surveys show the public now has more faith in the main
opposition party's ability to handle financial affairs than the
ruling Labour Party.
Northern Rock's new management team, headed by financial
troubleshooter Ron Sandler, will draw up a business plan for the
bank with a view to selling it to a private sector bidder in due
Those plans will be influenced by European Union state aid
rules. The European Commission is likely to force Northern Rock
to shrink to compensate for the state aid it has received.
Such downsizing is standard for companies, publicly or
privately owned, that obtain significant government aid for
restructuring. The rules are designed to deal with the concerns
of competitors who see government aid going to a rival.
Date created : 2008-02-22