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Virgin set to buy UK's first bank crisis victim
Source: Agencies |
November 18, 2011, Friday
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THE UK government said yesterday it is selling mortgage lender Northern Rock, the nation's first victim of the credit crisis, to Virgin Money, owned by billionaire Richard Branson's Virgin Group.
Virgin is paying 747 million pounds (US$1.2 billion) but there are provisions for the government to receive up to 1 billion pounds in total, the Treasury said. Virgin Money has promised it will not lay off employees and will maintain the full branch network for at least three years.
Treasury chief George Osborne said: "It was clear to us that this was the best deal for the British taxpayer. We are getting more money back than any other deal on the table."
He said the sale would also increase competition in the banking sector, which is dominated by four large banks.
Northern Rock's funding crisis in late 2007 gave the UK shocking images of desperate depositors lining up to withdraw their money. The government nationalized the bank in February 2008, and guaranteed the security of savings deposits.
The sale includes 75 branches, 2,100 staff, 1 million customers, retail deposits of 16 billion pounds and a mortgage book of 14 billion pounds.
Virgin Money was founded in 1995 and has around 3 million customers. The purchase of Northern Rock is funded by a consortium led by Virgin Group and WL Ross & Co, a turnaround specialist.
Branson said: "Banking in the UK needs some fresh ideas and an injection of new competition. I am delighted we will get the chance to work with the loyal staff of Northern Rock to create a new force in the market."
Before the bank was nationalized, Virgin Money made an offer in 2008 to take over Northern Rock but it was rejected by the government as too risky and too expensive.
Virgin is paying 747 million pounds (US$1.2 billion) but there are provisions for the government to receive up to 1 billion pounds in total, the Treasury said. Virgin Money has promised it will not lay off employees and will maintain the full branch network for at least three years.
Treasury chief George Osborne said: "It was clear to us that this was the best deal for the British taxpayer. We are getting more money back than any other deal on the table."
He said the sale would also increase competition in the banking sector, which is dominated by four large banks.
Northern Rock's funding crisis in late 2007 gave the UK shocking images of desperate depositors lining up to withdraw their money. The government nationalized the bank in February 2008, and guaranteed the security of savings deposits.
The sale includes 75 branches, 2,100 staff, 1 million customers, retail deposits of 16 billion pounds and a mortgage book of 14 billion pounds.
Virgin Money was founded in 1995 and has around 3 million customers. The purchase of Northern Rock is funded by a consortium led by Virgin Group and WL Ross & Co, a turnaround specialist.
Branson said: "Banking in the UK needs some fresh ideas and an injection of new competition. I am delighted we will get the chance to work with the loyal staff of Northern Rock to create a new force in the market."
Before the bank was nationalized, Virgin Money made an offer in 2008 to take over Northern Rock but it was rejected by the government as too risky and too expensive.
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