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Northern Rock sale ‘best for taxpayer'

Northern Rock sale ‘best for taxpayer'

Category: Banking

Updated: 28/02/2012
First Published: 28/02/2012

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The Chancellor's decision to sell Northern Rock to Virgin Money was in the best interests of taxpayers, according to the body responsible for Government shareholdings in bailed out banks.

In a report on the sale of Northern Rock, UK Financial Investments (UKFI) said taxpayers could expect a positive return from the deal.

It calculated that while the Government had provided £37 billion of funding to rescue the bank, the return of cash from the two companies could be expected to total between £46 billion and £48 billion.

This could leave the taxpayer some £11 billion in pocket.

Following its bail out, the bank was split into two.

Northern Rock plc became known as the 'good bank', and has subsequently been sold to Virgin Money.

Northern Rock Asset Management, meanwhile, is popularly known as the 'bad bank', as it holds all the mortgages and bad debts which helped cause the bank to get into trouble in the first place.

The report also concluded that the Virgin Money deal was the best option that was on the table.

With Virgin having paid an initial £747 million to buy the bank, the report said the taxpayer can expect to receive up to £1 billion in total.

"UKFI, having taken advice from Deutsche Bank, concluded that a sale to Virgin Money was the option that would maximise value for the taxpayer," said the report.

"The transaction met UKFI's mandated objectives to create and protect value for the taxpayer as shareholder, paying due regard to financial stability and competition and it met the European Commission sale deadline of 31 December 2013."

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