Government set to strip Northern Rock of 100% savings guarantee
In a further move towards a return to the private sector it has been revealed that the UK government is set to withdraw the 100% guarantee for savers with Northern Rock. This guarantee was introduced after the bank nearly collapsed and customers were looking to leave en masse. However, the bank has undergone a major reorganisation over the last few months which seen the company split into a "good bank" and a "bad bank".
There have been rumours in the market for some time that the likes of Virgin Money and overseas parties may well be interested in acquiring the Northern Rock "good bank". No price has yet been mentioned but it seems that Northern Rock is set for an imminent return to the private sector probably as part of a larger operation. So what does this mean for UK taxpayers?
While many taxpayers are assuming that a return to the private sector will see significant taxpayer loans repaid immediately this is unlikely to be the case. Many of the bad debts and more risky investments have been retained within the "bad bank" and indeed taxpayer loans to the business have increased during the reorganisation process. How and when UK taxpayers will receive any repayment of the massive funds injected into the operation remains to be seen.
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