UK Government: Government welcomes approval of Northern Rock restructure

The Government has today welcomed the European Commission's (EC) approval of the legal and capital restructure of Northern Rock.

The restructure will strengthen Northern Rock's capital position and enable the bank to return to the mortgage market and support the economic recovery as by proposed by the Government in February. Under the restructure, the back book of mortgages will be managed separately to Northern Rock's other businesses.

The Government has made clear that it wants to see a well functioning mortgage market with responsible lending and access to a wide range of affordable mortgages. The approach towards Northern Rock is part of meeting these aims.

Financial Services Secretary to the Treasury Paul Myners said:

"The Government's actions over the past two years to stabilise Northern Rock have protected the savings and deposits of hundreds of thousands of British families. Today's announcement is an important milestone for the bank and its staff."

Government guarantees in relation to retail deposits with Northern Rock, announced in the autumn of 2007 remain in place.

As previously stated, the Government's objectives in relation to Northern Rock are to support financial stability, protect depositor's money and protect the interest of the taxpayer. The Government announced in its white paper in July that one of the conditions for the eventual sale of the bank will be that it must promote competition in the banking sector.

Notes to editors

1. Since March 2008 Northern Rock has operated under a competitive framework that restricted its commercial activities in specific areas, in order to prevent Northern Rock gaining unfair advantage as a result of government support.

2. The state aid package approved today contains a number of compensatory measures that will replace the existing competitive framework within which Northern Rock currently operates.

3. The package is subject to final Ministerial approval, expected later this year.

4. For further detail in relation to today's announcement visit:

European Commission website:

http://ec.europa.eu/unitedkingdom/index_en.htm

Northern Rock website:

http://www.northernrock.co.uk

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