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Further Details of Nationalised Bank Split Revealed

Thu, 10 Dec 2009

The Treasury has given further details of the impending split of Northern Rock to its savings account customers. The bank almost collapsed in 2007 as panic struck savers that they may lose their money, resulting in mass withdrawals of cash. Seen as the event which kickstarted the credit crunch in the UK, the bank has since been fully nationalised and is to be restructured on January 1st.

The update has revealed that all existing low risk assets will be put into a good bank, still known as Northern Rock. These assets will include retail savings accounts and other similarly 'safe' products. The bank will offer new savings and current accounts to customers, and it is hoped that the bank may eventually be sold back into the private sector. It remains to be seen how competitive the bank will be, and whether it will be able to offer attractive interest rates to customers.

The risky loans, meanwhile, will be retained by the government in a 'bad bank'. Around £50 billion of outstanding mortgages will be held in the organisation, which is likely to be called Northern Rock ( Asset Management ). Any profits made by this institution will be used to repay government loans issued to Northern Rock.
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