Northern Rock and Bradford & Bingley merger

Northern Rock and the Bradford & Bingley will be merged together by the UK government in an attempt to increase the pace at which UK taxpayers can expect to receive repayment of the loans offered by the government during the credit crunch. In effect the two "bad banks" from Northern Rock and Bradford & Bingley, which contain potentially toxic mortgage arrangements, will be brought together under a new holding company which should reduce the cost base and strengthen the business going forward.

This comes on the same day that Northern Rock has revealed that £1 billion of the outstanding £24 billion tax payer loan has so far been repaid this year which is a significant increase from the £300 million announced in August. There are concerns that putting together the "two bad banks" could be a recipe for disaster but the authorities believe they will be stronger as a combined unit.

It will be interesting to see how and when the merged "bad bank" is sold off as the UK authorities are keen to offload any potential liabilities for UK taxpayers going forward. There is also the need to return these companies to the private sector because of their influence in the mortgage market.