Alistair Darling has announced the first nationalisation of a sizeable British bank in a quarter of a century as he put Northern Rock into public ownership, infuriating shareholders and shocking the two private bidders hoping to take over the stricken mortgage lender. Financial Times, The Times, Daily Telegraph, The Independent, The Guardian
The chancellor and Ron Sandler, Northern Rock’s new executive chairman, insisted it would be 'business as usual'.
Sandler, who is to be paid £90,000 a month in his new role, insisted branches would open on time, customers would be able to withdraw and deposit money, and the government guarantees to depositors remained in place.
Shares in the bank, which closed at 90p on Friday, will be suspended this morning and shareholders can expect virtually no compensation for their equity.
Darling said the legislation to be brought to parliament today would appoint independent arbiters to determine what the shares were worth, but the legislation would propose that the government should not be required to compensate shareholders for any value that is dependent on taxpayers’ support.
The government’s move stunned shareholders, who were last night considering action. Jon Wood of the SRM hedge fund, the bank’s biggest shareholder, said: 'This is a very sad day for the stock market, banking industry and the reputation of the UK as a financial centre.'