The government has today announced that it is selling Northern Rock plc to Virgin Money, returning the institution to the private sector.
The move sees the first transfer back of public sector stakes in the banks that were acquired by the government at the height of the credit crunch in 2008.
Today’s announcement is being heralded as part of the government’s wider strategy for the banking sector with safer ring-fenced banks and the intention to create more competition for banks.
Deal will be worth around £1 billion
Virgin Money is paying the government £747 million in cash initially for Northern Rock, with the potential in the future to receive over £1 billion in total. The deal covers Northern Rock’s mortgage and savings businesses.
Creating a new major player in the retail banking sector is intended to increase diversity with Virgin Money having a reputation for innovation and seeking to expand into new markets.
The sale will not impact on the current customers of Northern Rock who can carry on banking as usual and is expected to be completed on 1 January 2012.
More choice on the high street for consumers
Which? executive director Richard Lloyd, commented: ‘A strong challenger to the dominant banks is vital if consumers are to see greater competition, fairness and a better deal on the high street.
‘Virgin Money’s purchase of Northern Rock is a good first step, but more must be done. As the Independent Commission on Banking recently concluded, the sale of branches by Lloyds Banking Group must ensure there is at least one other genuine new entrant to the retail banking market.’
The Chancellor of the Exchequer, George Osborne, said of the deal: ‘The sale of Northern Rock to Virgin Money is an important first step in getting the British taxpayer out of the business of owning banks. It represents value for money; will increase choice on the high street for customers; and safeguards jobs in the North East.’
Northern Rock chief executive, Ron Sandler, added: ‘The return of Northern Rock to the private sector has always been one of our key objectives. It is a very positive outcome for the company following a significant restructuring process.’
- Which? Best Rate savings deals – if you want to see how Northern Rock’s savings products stack up
- Which? Best Rate mortgage products – check out all the best mortgage deals on the market
- Are my savings safe? – our guide to the Financial Services Compensation Scheme outlines how your cash is protected