Banking group Northern Rock has said that its board is setting out its intentions for the future direction of the business during the period of temporary public ownership. These are being worked up into a full business plan, which will be submitted to the HM Treasury for approval by the end of March 2008.
The government has confirmed that it has sent the European Commission the necessary formal notification of its intention to continue to provide the existing restructuring aid to Northern Rock to support this process.
The board of Northern Rock will be submitting to the HM Treasury a plan which will set out the basis for the removal of government support through the creation of a smaller, more focused, financially viable mortgage and savings bank which will be returned to the private sector.
The proposed plan will be designed to deliver the government’s previously stated objectives to protect UK taxpayers, promote financial stability and protect depositors, and will be based around certain strategic priorities and these include contracting to a smaller, sustainable business through a reduction in the asset base of around a half by 2011, while maintaining a modest level of new loan origination.
The other priorities include progressive repayment of the Bank of England loan and release of the government guarantees over the next three to four years, while increasing the level of retail deposits to form a larger share of total funding; restructuring the organization and its operations so that these are aligned to the business objectives; and strengthening risk management in key business areas.
Ron Sandler, executive chairman, said: I am pleased that we are making good progress in developing our provisional business plan. This will be a robust plan to create a smaller mortgage and savings bank that will be tightly focused and financially viable.