Northern Rock splits in January
As previously announced, the restructuring will result in two separate companies:
• Northern Rock plc – a new savings and mortgage bank that will hold and service all customer savings accounts (balances are currently approximately £19 billion) and approximately £10 billion of mortgages. The new bank will be regulated as a deposit taker and mortgage lender by the FSA. It will offer new savings products and will also offer new mortgage lending to increase mortgage supply and help sustain a competitive market. Northern Rock plc will also hold certain wholesale deposits.
• Northern Rock (Asset Management) plc– the existing company (renamed) which will hold and service the majority of the existing residential mortgage book (approximately £50 billion) and will be regulated by the FSA as a mortgage provider, not a deposit taking bank.
At the Transfer Date, it is expected that over 90% of the mortgages held by Northern Rock (Asset Management) plc will be fully performing and not in arrears. The portfolio will include the Company’s residual interest in those mortgages which have been sold to the Granite securitisation programme and the Northern Rock covered bond programme (totalling approximately £38 billion). This company will not offer any new mortgage lending.
For Northern Rock customers it is business as usual and they need take no action. All savings accounts will be transferred to the new bank, Northern Rock plc, on 1 January 2010. The majority of mortgage accounts will remain in the existing company, Northern Rock (Asset Management) plc, and a proportion of mortgage accounts will be transferred to the new bank, Northern Rock plc, also on 1 January 2010. All customers will be informed in writing, during January, which company holds their account.
Gary Hoffman, chief executive said: “Today is a very important step towards completing the legal and capital restructure of Northern Rock into two separate companies on 1 January 2010.
“We want this to be a seamless process for our customers and they do not need to take any action. We will be writing to them in early January confirming which company holds their account – but we have already confirmed that all savings accounts will be in the new bank.
“I am pleased with the progress to date and all of the hard work colleagues are doing behind the scenes to ensure this is a smooth process for customers.”