London: Treasury chief Alistair Darling said on Monday that struggling bank Northern Rock PLC will be nationalized after the government rejected two private takeover bids.
Darling told a news conference that the ailing mortgage lender would be placed under temporary public ownership because both bids had failed to meet the government’s demands.
He said neither a proposal from Richard Branson’s Virgin Group nor an in-house management team delivered “sufficient value for money to the taxpayer.”
The government had said more than $ 49 billion in government loans must be paid back within three years.
“Taking into account the wider considerations, I’ve concluded this is the right approach,” Darling told the news conference.
“It is our belief that the company can be moved back into the private sector at the earliest and most prudent opportunity,” he said.
Northern Rock ran into trouble in September because it relied too heavily on short-term money markets instead of deposits for funding. A subsequent profit warning and appeal to the Bank of England for an emergency loan led to the first run on a British bank since 1866.
The government had been in the middle of an auction process to find a private buyer for Northern Rock, with revised bids submitted this weekend by Virgin and the in-house management team.