If the lender has to be put into administration, depositors will receive their money back from the fund. The plan is believed to involve the Bank of England buying Northern Rock’s deposits and swiftly paying the balances back to customers.
Despite the run on the bank earlier this year following the announcement of emergency funds being given to Northern Rock, borrowers have remained with the bank and in the event of further financial problems, both the Treasury and Bank of England have felt the need to intervene further.
It is understood that the Treasury is keen on having a credible backstop in case negotiations over a sale fall through. Should shareholders or bidders involved in Northern Rock 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.
The involvement of the government in Northern Rock has also caused a revolt on the social networking website Facebook, with a group created in order to reclaim tax that is being spent on backing the bank. The founders of the group claim that £1,000 per tax payer is being spent on keeping Northern Rock afloat, and the members want to get their money back as it is deemed ‘a bad investment.’
Chairman of the Council of Mortgage Lenders, John Pain, commented: “Lessons clearly have to be learnt by all parties; including those of us managing businesses in the mortgage market, the regulators, the Treasury, and the Bank of England. It’s equally clear that the issues could have been much better managed. But trying to rewrite history and what might have been rarely yields results.”
Answer ten questions to win Amazon vouchers!
Get the daily news delivered to your inbox
Find the latest industry jobs
