Treasury and Bank of England officials are drawing up contingency plans to pay Northern Rock’s depositors their money if the stricken lender has to be put into administration as bidders continue to fight it out. Financial Times, The Times, Daily Telegraph.
The plan would see the central bank buying Northern Rock’s deposits and swiftly paying the balances back to customers.
If Northern Rock’s shareholders or bidders make demands on taxpayers’ money that the authorities regard as unreasonable, preparations are being finalised to withdraw the government’s financing of the bank and take control of savers’ deposits.
JC Flowers and Luqman Arnold have met Northern Rock several times over the past few days in a bid to convince the board they each have more viable offers than Virgin.
Arnold will present a rival plan for Northern Rock later this week. US private equity firm Flowers submitted a revised proposal on Friday. Hedge fund Cerberus also submitted an updated offer on Friday.
Despite the emergence of several detailed offers for Northern Rock, its shares fell 9 to 109p on market jitters about Virgin’s bid for it.