The Government may yet avoid nationalising Northern Rock but the stricken bank officially became a public sector company yesterday, breaking one of the Treasury's key rules on borrowing in the process. Finanial Times, The Times, The Independent, Daily Telegraph
The Office for National Statistics announced the level of support and control the Government has over the bank means it must be treated in the same way as a nationalised company. As a result, its balance sheet must be considered part of the public finances.
The ONS said the Bank of England could control Northern Rock's corporate policy because of covenants on the loans it has made to the ailing lender. The central bank's powers include deciding on corporate restructuring, dividend payments and acquisitions or disposals, the ONS said.
The statistics office also decided to include Northern Rock's special-purpose securitisation vehicles as public sector entities. For consistency, the Bank of England will also be included within the public sector finances.