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Tories call for bank assurances Lib Dems call for Rock takeover
(about 3 hours later)
The Conservatives are demanding government assurances that taxpayers' interests are being safeguarded over Northern Rock bank. The Liberal Democrats are calling for the government to take over control of ailing bank Northern Rock after its chief executive resigned.
Their calls come after the bank's chief executive, Adam Applegarth, resigned. Acting Lib Dem leader Vince Cable said a temporary government takeover was the best way to safeguard the £24bn of public money loaned to the bank.
The Tories are demanding assurances taxpayers' money is being safeguarded.
The bank's shares collapsed after it was forced to seek emergency funding from the Bank of England in September.The bank's shares collapsed after it was forced to seek emergency funding from the Bank of England in September.
Two suitors, Virgin Group and investment firm Olivant Advisers, confirmed they had made proposals to rescue the bank by a Friday deadline. 'Least worst option'
The shadow chancellor, George Osborne, said the departure at the bank had added to confusion surrounding the mortgage lender. Mr Cable told BBC News there were three options for the government - let Northern Rock go into receivership, seek a private buyer, or take it over itself.
It has been shored up with Bank Of England loans totalling £24bn. He said the first option would be a "desperate measure", which would lead to the government losing billions, bank workers losing their jobs and the Northern Rock Foundation - the bank's charitable arm - being imperilled.
He said the resignation of Mr Applegarth was not enough to reassure taxpayers. He said any private buyer would be looking for "a lot of public money", making a government takeover the "least worst" option and the "best way probably of guarding the vast amount of public money now tied up in the bank".
"The confusion and indecision surrounding the handling of Northern Rock grows and grows," he said.
Takeover 'imminent'
US private equity firms JC Flowers and Cerberus are among other firms expected to come forward with offers for the beleaguered Newcastle-based bank, which is responsible for about one in five mortgages in the UK.
There's going to be a deal announced before Monday because if not, on Monday morning, Northern Rock will be an institution without a board Will HuttonWork Foundation Suitors confirm Rock offers There's going to be a deal announced before Monday because if not, on Monday morning, Northern Rock will be an institution without a board Will HuttonWork Foundation Suitors confirm Rock offers
Northern Rock said that David Baker, Keith Currie and Andy Kuipers were standing down as board directors but would stay with the firm. Earlier, Northern Rock announced its chief executive, Adam Applegarth, was to step down in the New Year.
At the same time, four non-executive directors, Sir Derek Wanless, Nichola Pease, Adam Fenwick and Rosemary Radcliffe, were stepping down immediately, it added. Shadow Chancellor George Osborne said Mr Applegarth's departure had added to confusion surrounding the mortgage lender and was not enough to reassure taxpayers.
"The confusion and indecision surrounding the handling of Northern Rock grows and grows," he said.
Two private investors - a consortium led by Richard Branson's Virgin Group and investment firm Olivant Advisers - confirmed they had made proposals to rescue the bank by a Friday deadline.
No deal can be done until Alistair Darling makes up his mind how long he is prepared to sustain the enormous financial support he has provided The BBC's Robert Peston Blog: Darling on Rock
US private equity firms JC Flowers and Cerberus are among other firms expected to come forward with offers for the Newcastle-based bank, which is responsible for about one in five mortgages in the UK.
As well as Mr Applegarth, Northern Rock said four non-executive directors, were resigning immediately.
At the same time, four board directors were standing down from the board but would stay with the firm.
'Deal before Monday'
Will Hutton, of the Work Foundation, said the resignations meant a takeover was imminent.Will Hutton, of the Work Foundation, said the resignations meant a takeover was imminent.
"It's no surprise, and they were there to steward Northern Rock through, and their resignation obviously signals that actually that period is over, and that puts a lot of heat on the authorities."It's no surprise, and they were there to steward Northern Rock through, and their resignation obviously signals that actually that period is over, and that puts a lot of heat on the authorities.
No deal can be done until Alistair Darling makes up his mind how long he is prepared to sustain the enormous financial support he has provided The BBC's Robert Peston Blog: Darling on Rock
"It means that actually there's going to be a deal announced before Monday because if not, on Monday morning, Northern Rock will be an institution without a board.""It means that actually there's going to be a deal announced before Monday because if not, on Monday morning, Northern Rock will be an institution without a board."
Northern Rock has been in trouble since getting caught up in the global credit crunch over the summer, which left it unable to borrow money from other banks to fund its business model.
Concerned customers rushed to withdraw their money, and the bank has since been seeking bidders to rescue it.
The problem facing Northern Rock was that three-quarters of its funding came from wholesale money markets, and when the global credit crunch took hold, its main source of financing dried up.
Northern Rock said Mr Applegarth would step down from his post once he had helped the lender complete the second phase of its strategic review, scheduled for completion no later than the end of January 2008.
Future plans
Analysts said there were a number of options for the bank going forward, ranging from an outright buy-out to a breaking up of the bank's assets.
There's no way out of this position that I can see, other than some form of break-up of Northern Rock John MoultonAlchemyThere's no way out of this position that I can see, other than some form of break-up of Northern Rock John MoultonAlchemy
Northern Rock has been in trouble since getting caught up in the global credit crunch over the summer, which left it unable to borrow money from other banks to fund its business model.
Concerned customers rushed to withdraw their money and the bank has since been seeking bidders to rescue it.
Analysts say there are a number of options for the bank going forward, ranging from an outright buy-out to a breaking up of the bank's assets.
John Moulton, a founding partner of private equity group Alchemy, said the whole affair had done an "enormous" amount of damage to the whole banking system.John Moulton, a founding partner of private equity group Alchemy, said the whole affair had done an "enormous" amount of damage to the whole banking system.
"The moment it was decided to try and rescue it, it was a one-way game," he told BBC Radio 4's Today programme."The moment it was decided to try and rescue it, it was a one-way game," he told BBC Radio 4's Today programme.
"There's no way out of this position that I can see, other than some form of break-up of Northern Rock - liquidate as much as you can for the government. That'll be the best outcome."There's no way out of this position that I can see, other than some form of break-up of Northern Rock - liquidate as much as you can for the government. That'll be the best outcome.
"Anything else is going to result in very large losses to the taxpayer.""Anything else is going to result in very large losses to the taxpayer."
A consortium led by Richard Branson's Virgin Group on Friday submitted a formal proposal to rescue Northern Rock.
Olivant, a team led by veteran trouble shooter and former Abbey National boss Luqman Arnold, said it had made a detailed proposal to stabilise the bank as a viable business and restore its finances.
JC Flowers has put together a high-profile management team to make their case for taking over the bank, while rival private equity firm Cerberus has also been rumoured to have been scouring Northern Rock's books.
But because any future owner would have to pay back about £24bn of Bank of England loans, analysts said bids were likely to be low.