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| Rock plan 'best meets objectives' | Rock plan 'best meets objectives' |
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| Chancellor Alistair Darling has said his plan to save Northern Rock best protects taxpayers and depositors while maintaining financial stability. | Chancellor Alistair Darling has said his plan to save Northern Rock best protects taxpayers and depositors while maintaining financial stability. |
| Mr Darling was talking to MPs after setting out a proposal to turn the firm's £25bn Bank of England loan into bonds and sell them to investors. | Mr Darling was talking to MPs after setting out a proposal to turn the firm's £25bn Bank of England loan into bonds and sell them to investors. |
| The bonds would be guaranteed by the government to speed up a private sale. | The bonds would be guaranteed by the government to speed up a private sale. |
| If a private sale is not reached, the bank will come under temporary public ownership, the chancellor reiterated. | If a private sale is not reached, the bank will come under temporary public ownership, the chancellor reiterated. |
| Either way, savers' money will be protected by the government. Northern Rock shares ended 46% higher at 94.25 pence. | Either way, savers' money will be protected by the government. Northern Rock shares ended 46% higher at 94.25 pence. |
| Approval required | Approval required |
| "The proposal that I set out today for a solution to Northern Rock - which is underpinned by Government support - is one which best meets our objectives of protecting taxpayers and depositors and maintaining financial stability," Mr Darling told the House of Commons. | "The proposal that I set out today for a solution to Northern Rock - which is underpinned by Government support - is one which best meets our objectives of protecting taxpayers and depositors and maintaining financial stability," Mr Darling told the House of Commons. |
| Bidders have until 4 February to come forward with rescue proposals based on the Treasury's plans. | Bidders have until 4 February to come forward with rescue proposals based on the Treasury's plans. |
| The scheme was proposed by investment bank Goldman Sachs and was given the green light by Prime Minister Gordon Brown over the weekend. | The scheme was proposed by investment bank Goldman Sachs and was given the green light by Prime Minister Gordon Brown over the weekend. |
| No British government has ever provided financial help on that scale to a business Robert Peston, BBC business editor Read Robert's thoughts in full Peston interview | No British government has ever provided financial help on that scale to a business Robert Peston, BBC business editor Read Robert's thoughts in full Peston interview |
| In effect, it turns Northern Rock debt into government bonds or gilt-edged stock. | In effect, it turns Northern Rock debt into government bonds or gilt-edged stock. |
| That would mean the taxpayer would be exposed to Northern Rock for a much longer period than planned, for five years or longer, analysts said. | That would mean the taxpayer would be exposed to Northern Rock for a much longer period than planned, for five years or longer, analysts said. |
| The Treasury's plan still needs to be approved by the Financial Service Authority (FSA), and to satisfy the European Commission's rules on state aid for companies. | The Treasury's plan still needs to be approved by the Financial Service Authority (FSA), and to satisfy the European Commission's rules on state aid for companies. |
| 'Unprecedented' | 'Unprecedented' |
| "The scale of the financial support the Chancellor has today promised to provide to Northern Rock is breathtakingly large and without precedent," said the BBC's Business Editor Robert Peston. | "The scale of the financial support the Chancellor has today promised to provide to Northern Rock is breathtakingly large and without precedent," said the BBC's Business Editor Robert Peston. |
| "No British government has ever provided financial help on that scale to a business." | "No British government has ever provided financial help on that scale to a business." |
| Banks in general found it harder to get funding after the credit crunch last summer, but Northern Rock was harder hit than others. | Banks in general found it harder to get funding after the credit crunch last summer, but Northern Rock was harder hit than others. |
| Its business model relied on the wholesale credit market to raise money - mainly by selling mortgage debt in the form of bonds. | Its business model relied on the wholesale credit market to raise money - mainly by selling mortgage debt in the form of bonds. |
| But after significant losses made by investors in loans to US homebuyers with poor credit history, financial institutions became reluctant to buy mortgage debt. | But after significant losses made by investors in loans to US homebuyers with poor credit history, financial institutions became reluctant to buy mortgage debt. |
| This is a perfectly good solution to the Northern Rock problem Simon Maughan,analyst at MF Global Read Chancellor Alistair Darling's statement in full | This is a perfectly good solution to the Northern Rock problem Simon Maughan,analyst at MF Global Read Chancellor Alistair Darling's statement in full |
| Following Mr Darling's statement, Shadow Secretary George Osborne said: "This is a part nationalisation because the government takes the bulk of the risk and the private sector takes the bulk of the upside." | Following Mr Darling's statement, Shadow Secretary George Osborne said: "This is a part nationalisation because the government takes the bulk of the risk and the private sector takes the bulk of the upside." |
| Vince Cable, the Treasury spokesman for the Liberal Democrats, said outright nationalisation would have been a better and more transparent option than what was being proposed. | Vince Cable, the Treasury spokesman for the Liberal Democrats, said outright nationalisation would have been a better and more transparent option than what was being proposed. |
| Conservative Treasury spokesman, Philip Hammond, earlier told the BBC that the government's plan didn't appear to have taxpayers' interests at its heart. | Conservative Treasury spokesman, Philip Hammond, earlier told the BBC that the government's plan didn't appear to have taxpayers' interests at its heart. |
| "What we're seeing here is a package which is actually designed to save Gordon Brown's face by postponing the moment of reckoning," he said. | "What we're seeing here is a package which is actually designed to save Gordon Brown's face by postponing the moment of reckoning," he said. |
| Sustainable future | Sustainable future |
| Mr Darling said putting the plan into practice depended "entirely on the terms on which a deal can be struck". | Mr Darling said putting the plan into practice depended "entirely on the terms on which a deal can be struck". |
| "Northern Rock would need to demonstrate how it can operate sustainably in future without any government support," he added. | "Northern Rock would need to demonstrate how it can operate sustainably in future without any government support," he added. |
| Northern Rock's Bank of England loan facility will be extended until 17 March to allow time to examine the proposed financing structure with Northern Rock and interested parties. | Northern Rock's Bank of England loan facility will be extended until 17 March to allow time to examine the proposed financing structure with Northern Rock and interested parties. |
| At the moment there are three front-runners: Olivant, the consortium led by Virgin, as well as the Rock's current board, which is developing its own standalone plan. | At the moment there are three front-runners: Olivant, the consortium led by Virgin, as well as the Rock's current board, which is developing its own standalone plan. |
| Olivant chairman Luqman Arnold said: "We have always said our plan seeks to find common ground between all stakeholders in Northern Rock by restoring the fortunes of the company and its brand." | Olivant chairman Luqman Arnold said: "We have always said our plan seeks to find common ground between all stakeholders in Northern Rock by restoring the fortunes of the company and its brand." |
| Reports over the weekend said that Sir Richard Branson's Virgin Group was preparing to make an improved offer for the beleaguered lender. | Reports over the weekend said that Sir Richard Branson's Virgin Group was preparing to make an improved offer for the beleaguered lender. |
| According to the Sunday Times, Virgin is preparing to cut its proposed stake in Northern Rock from 54% to 45%. Such a move would allow existing shareholders more room to share in any recovery in the price of Northern Rock stock. | According to the Sunday Times, Virgin is preparing to cut its proposed stake in Northern Rock from 54% to 45%. Such a move would allow existing shareholders more room to share in any recovery in the price of Northern Rock stock. |
| Public ownership | Public ownership |
| Observers have said the Treasury's funding proposals could attract other suitors, now that a buyer would not have to shoulder the whole £25bn worth of Bank of England loans. | Observers have said the Treasury's funding proposals could attract other suitors, now that a buyer would not have to shoulder the whole £25bn worth of Bank of England loans. |
| This had been a key sticking point in a private sale, with Virgin and Olivant unable to secure private loans to pay back this debt in the crisis-hit money markets. | This had been a key sticking point in a private sale, with Virgin and Olivant unable to secure private loans to pay back this debt in the crisis-hit money markets. |
| HAVE YOUR SAYOther businesses are not propped up by the government, why should a bank be any different?John Carter, BristolSend us your comments | HAVE YOUR SAYOther businesses are not propped up by the government, why should a bank be any different?John Carter, BristolSend us your comments |
| "This is a perfectly good solution to the Northern Rock problem," said Simon Maughan, an analyst at MF Global. | "This is a perfectly good solution to the Northern Rock problem," said Simon Maughan, an analyst at MF Global. |
| Robin Ashby, head of the group representing Northern Rock's small shareholders, said he bought shares in the bank earlier as a vote of confidence that a deal could be done under the new funding arrangements. | Robin Ashby, head of the group representing Northern Rock's small shareholders, said he bought shares in the bank earlier as a vote of confidence that a deal could be done under the new funding arrangements. |
NORTHERN ROCK RESCUE PLAN EXPLAINED IN THREE STEPS | |