Northern Rock
Encyclopedia
Northern Rock plc is a British bank, best known for becoming the first bank in 150 years to suffer a bank run
after having had to approach the Bank of England for a loan facility, to replace money market funding, during the credit crisis in 2007. Having failed to find a commercial buyer for the business, it was taken into public ownership in 2008. It is based at Regent Centre
in Newcastle upon Tyne
, United Kingdom. Formerly the Northern Rock Building Society, the bank was formed in 1997 when the society
floated on the London Stock Exchange
. Since 1 January 2010 the "Northern Rock" name has referred to two companies – this bank, Northern Rock plc
, and a separate asset company, Northern Rock (Asset Management) plc
.
On 17 November 2011 it was announced that Virgin Money
were going to buy Northern Rock plc for £747 million up front and other potential payments of up to £280 million over the next few years. The sale is expected to go through on 1 January 2012. The government said it had no plans to sell Northern Rock (Asset Management). There will be no further job losses, except for the ones already announced. Virgin have also pledged to keep the headquarters of the bank in Newcastle upon Tyne. The deal is pending regulatory and EU merger approval, and the combined business will operate under the Virgin Money brand.
Building Societies; the Northern Counties Permanent Building Society (established in 1850) and the Rock Building Society (established in 1865). During the 30 years that followed, Northern Rock expanded by acquiring 53 smaller building societies, most notably the North of England Building Society in 1994.
Along with many other UK building societies in the 1990s, Northern Rock chose to demutualise
and float on the stock exchange, to be able to expand their business more easily. Throughout this period a concern against demutualisation was that the assets of a mutual society were built up by its members throughout its history, not just by current members, and that demutualisation was a betrayal of the community that the societies were created to serve. Northern Rock chose to address these concerns by founding the Northern Rock Foundation. At its Stock Exchange flotation Northern Rock distributed shares
to members with savings accounts and mortgage loan
s. It joined the stock exchange as a minor bank and was expected to be taken over by one of its larger rivals, but it remained independent.
In 2000, Northern Rock gained promotion to the FTSE 100 Index
, but was demoted back to the FTSE 250
in December 2007 and later suspended from the LSE due to the bank's nationalisation
.
On 14 September 2007, during the financial crisis of 2007–2010, the Bank sought and received a liquidity support facility
from the Bank of England
, following problems in the credit markets caused by the US subprime mortgage financial crisis.
The bank was nationalised at 00:01 on 22 February 2008
as a result of two unsuccessful bids to take over the bank, neither being able to fully commit to repayment of taxpayers' money. In doing so the Government effectively took ownership away from its shareholders, as of August 2011 without reimbursement. The media also reported cases where some shareholders had their life savings in the shares, which were taken from them. The shares had already lost over 90% of their value prior to nationalization, and were valued at nil in an independent valuation process.
On 1 January 2010 the bank was split into two parts, assets
and banking. In June 2011 the bank was officially put up for sale back to the private sector.
On 17 November 2011 it was announced that Virgin Money were going to buy Northern Rock plc for £747 million. The sale is expected to be complete on 1 January 2012.
Northern Rock has been one of the top five mortgage lenders in the United Kingdom in terms of gross lending according to Council of Mortgage Lenders
statistics.
As well as mortgages, the bank also deals with savings accounts, loans and insurance. The company also promotes secured loans to its existing mortgage customers. The unsecured loans business is administered and underwritten by Ventura
based in Leeds
. Home and contents insurance is dealt with by AXA
whilst Legal & General
, whose mortgage book Northern Rock took over, arrange insurance and stock-market-based investments. Payment Protection Insurance
(PPI) can be arranged with London-based Cardif Pinnacle.
In 2003, to free capital for its rapid growth in mortgage lending, the bank sold its credit card business to The Co-operative Bank
for a profit of more than £7 million. Until November 2007 Northern Rock continued to sell credit cards under their own brand through The Co-operative Bank; the decision to stop was made before the 2007 crisis.
In 2006 the bank had moved into sub-prime lending via a deal with Lehman Brothers
. Although the mortgages were sold under Northern Rock's brand through intermediaries, the risk was being underwritten
by Lehman Brothers.
The bank is based on a large site at the Regent Centre
in Gosforth
, Newcastle upon Tyne
. It has customer contact centre operations at both Doxford International Business Park
in Sunderland and at its head office. The bank developed a site at Rainton Bridge, which it sold to Npower
.
, purchased the building for £22 million, and leased it to a green support services company, Eaga
(now Carillion Energy).
The Gosforth site currently consists of the Kielder and Prudhoe buildings, completed in the early 1990s, behind which lies the distinctive glass-fronted Alnwick building. The main Atrium reception is adjacent to this, opening out onto Baker Street, a large covered atrium that houses a restaurant, shop and on-site branch. A number of other buildings, all named after North-Eastern castles are joined to Baker Street.
was established in February 1996, handling offshore savings and investment accounts. The Guernsey business was shut down on 2 September 2010.
Northern Rock opened a branch in Ireland on 16 November 1999 and the first branch in Northern Ireland
followed on 4 April 2007. The first branch of the bank opened in Denmark on 7 February 2007; however as part of the Government restructuring, the Danish operations ceased on 18 June 2008.
In 2000 Northern Rock introduced a new corporate identity consisting of a magenta square containing the company name. This replaced the NR 'blocks' logo. The Northern Rock Foundation also changed its logo in 2003 from the NR 'blocks' inline with the main company, using the same new typeface. The Red Box Design Group
designed all the currently standing buildings at the company's headquarters in Gosforth and have contributed to many of the other design aspects of the company, such as the in-branch styling. From 1 October 1997 until the government nationalisation, the bank used the symbol NRK on the London Stock Exchange.
At the time of the 2007 financial crisis Matt Ridley
was the Chairman and Adam Applegarth
was the Chief Executive. Ridley resigned in October 2007 and Applegarth resigned in November 2007, although the latter stayed on in a caretaker role until December 2007. The Chief Executive was Andy Kuipers, who joined the company in 1987, and retired on 31 August 2008.
In February 2008, Ron Sandler
was appointed Executive Chairman by the government. Gary Hoffman became Chief Executive of Northern Rock in October 2008. He had previously been the vice chairman of Barclays and a former Managing Director of Barclaycard
. With the appointment of Gary Hoffman, Ron Sandler changed to a Non-Executive Chairman position.
Since the split of the bank into Northern Rock plc and Northern Rock (Asset Management)
plc on 1 January 2010, each company has its boards of directors.
On 4 November 2010 Northern Rock announced that Gary Hoffman has left the bank and is to move to NBNK Investments as CEO. NBNK Investments cannot table a bid for Northern Rock for a period of 12 months.
Northern Rock plc board as of 8 April 2010:
(rugby union
), Newcastle Eagles
(basketball), Durham
and Middlesex
County Cricket clubs, professional golfer Paul Eales
and the cycling festival Northern Rock Cyclone. The sponsorship of Newcastle United began in 2003, and was set to expire in 2010, before an extension to 2014. This extension included a get-out clause in June 2012, which was activated in November 2011. The current five year deal from 2005 to 2010 was worth £25 million.
In 2005, to coincide with the Spirit of the Tall Ships Festival, Northern Rock enlisted the help of Red Box Interiors to create a temporary art installation at The Baltic Centre for Contemporary Art
on the Gateshead
Quay of the Tyne
. The art entitled "Northern Rock @ Baltic" included mobile light stem sculptures and large scale external graphics.
Northern Rock sponsors the North East Premier League
competition for recreational club cricket
. In 2006 Northern Rock sponsored the All*Star Cup celebrity Golf match, which was shown on ITV
. The bank also sponsors a junior golf tournament, The Rock Junior Golf Festival, held at Matfen Hall
.
In 2007, almost three weeks before the bank had to appeal to the Bank of England
for an emergency loan, the bank bought the home ground of Newcastle Falcons
Rugby Club, Kingston Park stadium
for £15 million. In February 2008, documents relating to the sale came to light, attracting much criticism that the purchase has been made at a time of impending crisis. In late 2008 the bank sold Kingston Park Stadium to Northumbria University
for an undisclosed fee.
It was confirmed on 20 May 2008 that Northern Rock would continue to sponsor both Newcastle United and the Newcastle Falcons, the former due to the long term agreement between them and the club. The sponsorship agreement with the Falcons came to an end before the start of the 2010/11 season.
On 18 January 2010 Northern Rock announced that they had signed a new 4 year sponsorship deal with Newcastle United, worth between £1.5 million and £10 million, starting from the 2010/11 season.
The company donates substantial amounts annually to its own charity, the Northern Rock Foundation. The foundation was formed when the company was floated, with an initial donation of 15% of the share capital and a covenant to donate 5% of the company's annual profit thereafter. In 2006, Northern Rock was the second largest charitable giver in the FTSE 100 after ITV
.
In April 1996, when the Building Society was considering demutualisation, plans were announced by the then chairman, Robert Dickinson, for the creation of the foundation. Since the official launch of the foundation in January 1998, it has steadily grown and expanded its activities. The Foundation's work is carried out by a professional staff team of 12 based in Gosforth. Previously in 2007 there had been 25 staff at the foundation. In 2003, along with a new logo and the introduction of new programmes, the Foundation moved to a new building – the renovated Old Chapel in Gosforth. At the end of 2006 the foundation received £28.2 million investment. By the end of 2007 £190 million had been donated to the foundation, by Northern Rock.
Nationalisation ended the covenant requiring Northern Rock to remit a share of profits to the Foundation. Instead, for the next three years the Foundation was to receive an annual £15 million payment from Northern Rock, whether it remained publicly owned or returned to the private sector. The Foundation's shares were to be cancelled and compensated in the same way as those of other shareholders. £7.3 million was awarded during the first 10 months of 2008, with an expected further £3.7 million before the end of the year.
Upon the sale to Virgin, the deals with the Northern Rock Foundation will be extended to at least 2013, giving Virgin and the Foundation time to agree how they will work together.
Northern Rock had a business plan which involved borrowing heavily in the UK and international money markets, extending mortgages to customers based on this funding, and then re-selling these mortgages on international capital markets, a process known as securitisation. When the global demand from investors for securitised mortgages dropped in August 2007, Northern Rock became unable to repay loans from the money market with money which should have been raised from securitisation. The problems were anticipated by the financial markets, which made the issue more public. On 14 September 2007, the bank sought and received a liquidity support facility from the Bank of England
, to replace funds it was unable to raise from the money market. This led to panic among individual depositors fearing that their savings might not be available should Northern Rock go into receivership. This led to a bank run
– the UK's first in 150 years – where depositors lined up outside the bank to withdraw all of their savings as quickly as possible, particularly since everyone else was doing the same.
On 22 February 2008, the bank was taken into state ownership as a result of two unsuccessful bids to take over the bank, neither being able to fully commit to repayment of taxpayers' money within three years. The bank is managed at "arms length" by the government through UK Financial Investments Limited
.
The bank planned to repay the government debt within three to four years, primarily by encouraging mortgage customers to take their mortgage to another lender. Costs were also reduced by reducing numbers of staff. As of 3 March 2009, the bank was repaying the loan well ahead of target, owing a net balance of only £8.9 billion of the loan which stood at £26.9 billion at the end of 2007.
By October, customers appeared to be regaining confidence in the bank, when it emerged that there had been a surge in the number of new accounts which had been opened. People perceived Northern Rock as a safe place to put their money, given that it is currently government owned. However there is no guarantee that if Northern Rock was to fail that the government would top-up any compensation over and above the standard £85,000 offered by the Financial Services Compensation Scheme
.
Former shareholders and hedge funds also took legal action in January 2009 to get a fair level of compensation for their shares; the shareholders lost the case. They also lost their appeals in the British courts, but hope to take the case to the European courts. On 8 December 2009, it was announced that the valuer Andrew Caldwell had decided that the Northern Rock shareholders should get no compensation.
On 23 February 2009, Northern Rock announced that they would be offering £14 billion worth of new mortgages, over the next two years, as a part of their new business plan. This new lending will be partly funded by an increase in the government loan, a reversal of previous strategy to pay the loan off as quickly as possible by actively encouraging mortgage customers to leave when their mortgage deal matures. The reason for this change was government policy to increase the availability of credit. This £14 billion will be split into £5 billion in 2009 and £9 billion in 2010.
Potential buyers for the bank include Virgin Money
, National Australia Bank
, NBNK
, Santander
, Blackstone
, Tesco
, TowerBrook
, Yorkshire Building Society
and Coventry Building Society
. Former Chancellor of the Exchequer
Alistair Darling
had stated that he was in no "hurry" to return the bank to the private sector. In July 2010, it was reported that a consortium
of City executives
were gathering to place a bid for Northern Rock.
The bank was split into two parts, assets
and banking on 1 January 2010. On 15 June 2011, it was announced that the bank was to be sold to a single buyer in the private sector by the end of the year.
On 22 March 2011, the bank issued its first mortgage securitisation since the 2007 recession which nearly brought the bank down.
On 17 November 2011 it was announced that Virgin Money were going to buy Northern Rock plc for £747 million.
Other websites
Bank run
A bank run occurs when a large number of bank customers withdraw their deposits because they believe the bank is, or might become, insolvent...
after having had to approach the Bank of England for a loan facility, to replace money market funding, during the credit crisis in 2007. Having failed to find a commercial buyer for the business, it was taken into public ownership in 2008. It is based at Regent Centre
Regent Centre
Regent Centre is a large business park in Gosforth, Newcastle upon Tyne, England. The Centre is home to a variety of companies, including banking group Northern Rock whose Head Office is located on the site...
in Newcastle upon Tyne
Newcastle upon Tyne
Newcastle upon Tyne is a city and metropolitan borough of Tyne and Wear, in North East England. Historically a part of Northumberland, it is situated on the north bank of the River Tyne...
, United Kingdom. Formerly the Northern Rock Building Society, the bank was formed in 1997 when the society
Building society
A building society is a financial institution owned by its members as a mutual organization. Building societies offer banking and related financial services, especially mortgage lending. These institutions are found in the United Kingdom and several other countries.The term "building society"...
floated on the London Stock Exchange
London Stock Exchange
The London Stock Exchange is a stock exchange located in the City of London within the United Kingdom. , the Exchange had a market capitalisation of US$3.7495 trillion, making it the fourth-largest stock exchange in the world by this measurement...
. Since 1 January 2010 the "Northern Rock" name has referred to two companies – this bank, Northern Rock plc
Public limited company
A public limited company is a limited liability company that sells shares to the public in United Kingdom company law, in the Republic of Ireland and Commonwealth jurisdictions....
, and a separate asset company, Northern Rock (Asset Management) plc
Northern Rock (Asset Management)
Northern Rock plc is a British asset holding and management company which was split away from the Northern Rock bank in 2010. It is currently under public ownership, due to the bank's nationalisation in 2008...
.
On 17 November 2011 it was announced that Virgin Money
Virgin Money
Virgin Money is a UK-based financial services company owned by the Virgin Group and founded by Sir Richard Branson in March 1995. It was originally known as Virgin Direct, and pioneered index tracking by launching a value Personal Equity Plan into the market. In the 2000s Virgin Money expanded its...
were going to buy Northern Rock plc for £747 million up front and other potential payments of up to £280 million over the next few years. The sale is expected to go through on 1 January 2012. The government said it had no plans to sell Northern Rock (Asset Management). There will be no further job losses, except for the ones already announced. Virgin have also pledged to keep the headquarters of the bank in Newcastle upon Tyne. The deal is pending regulatory and EU merger approval, and the combined business will operate under the Virgin Money brand.
History
Northern Rock Building Society was formed in 1965 as a result of the merger of two North EastNorth East England
North East England is one of the nine official regions of England. It covers Northumberland, County Durham, Tyne and Wear, and Teesside . The only cities in the region are Durham, Newcastle upon Tyne and Sunderland...
Building Societies; the Northern Counties Permanent Building Society (established in 1850) and the Rock Building Society (established in 1865). During the 30 years that followed, Northern Rock expanded by acquiring 53 smaller building societies, most notably the North of England Building Society in 1994.
Along with many other UK building societies in the 1990s, Northern Rock chose to demutualise
Demutualization
Demutualization is the process by which a customer-owned mutual organization or co-operative changes legal form to a joint stock company. It is sometimes called stocking or privatization. As part of the demutualization process, members of a mutual usually receive a "windfall" payout, in the form...
and float on the stock exchange, to be able to expand their business more easily. Throughout this period a concern against demutualisation was that the assets of a mutual society were built up by its members throughout its history, not just by current members, and that demutualisation was a betrayal of the community that the societies were created to serve. Northern Rock chose to address these concerns by founding the Northern Rock Foundation. At its Stock Exchange flotation Northern Rock distributed shares
Share (finance)
A joint stock company divides its capital into units of equal denomination. Each unit is called a share. These units are offered for sale to raise capital. This is termed as issuing shares. A person who buys share/shares of the company is called a shareholder, and by acquiring share or shares in...
to members with savings accounts and mortgage loan
Mortgage loan
A mortgage loan is a loan secured by real property through the use of a mortgage note which evidences the existence of the loan and the encumbrance of that realty through the granting of a mortgage which secures the loan...
s. It joined the stock exchange as a minor bank and was expected to be taken over by one of its larger rivals, but it remained independent.
In 2000, Northern Rock gained promotion to the FTSE 100 Index
FTSE 100 Index
The FTSE 100 Index, also called FTSE 100, FTSE, or, informally, the footsie , is a share index of the 100 most highly capitalised UK companies listed on the London Stock Exchange....
, but was demoted back to the FTSE 250
FTSE 250 Index
The FTSE 250 Index is a capitalisation-weighted index consisting of the 101st to the 350th largest companies on the London Stock Exchange. Promotions to and demotions from the index take place quarterly in March, June, September and December...
in December 2007 and later suspended from the LSE due to the bank's nationalisation
Nationalization
Nationalisation, also spelled nationalization, is the process of taking an industry or assets into government ownership by a national government or state. Nationalization usually refers to private assets, but may also mean assets owned by lower levels of government, such as municipalities, being...
.
On 14 September 2007, during the financial crisis of 2007–2010, the Bank sought and received a liquidity support facility
Discount window
The discount window is an instrument of monetary policy that allows eligible institutions to borrow money from the central bank, usually on a short-term basis, to meet temporary shortages of liquidity caused by internal or external disruptions...
from the Bank of England
Bank of England
The Bank of England is the central bank of the United Kingdom and the model on which most modern central banks have been based. Established in 1694, it is the second oldest central bank in the world...
, following problems in the credit markets caused by the US subprime mortgage financial crisis.
The bank was nationalised at 00:01 on 22 February 2008
Nationalisation of Northern Rock
In 2008 the Northern Rock bank was nationalised by the British Government, due to financial problems caused by the subprime mortgage crisis...
as a result of two unsuccessful bids to take over the bank, neither being able to fully commit to repayment of taxpayers' money. In doing so the Government effectively took ownership away from its shareholders, as of August 2011 without reimbursement. The media also reported cases where some shareholders had their life savings in the shares, which were taken from them. The shares had already lost over 90% of their value prior to nationalization, and were valued at nil in an independent valuation process.
On 1 January 2010 the bank was split into two parts, assets
Northern Rock (Asset Management)
Northern Rock plc is a British asset holding and management company which was split away from the Northern Rock bank in 2010. It is currently under public ownership, due to the bank's nationalisation in 2008...
and banking. In June 2011 the bank was officially put up for sale back to the private sector.
On 17 November 2011 it was announced that Virgin Money were going to buy Northern Rock plc for £747 million. The sale is expected to be complete on 1 January 2012.
Operations
Council of Mortgage Lenders
The Council of Mortgage Lenders is an industry body representing mortgage lenders in the United Kingdom.Its members consist of banks, building societies and specialist lenders and represent 98% of mortgage lending in the UK....
statistics.
As well as mortgages, the bank also deals with savings accounts, loans and insurance. The company also promotes secured loans to its existing mortgage customers. The unsecured loans business is administered and underwritten by Ventura
Ventura
-Places:*Ventura, California, US*Ventura, Iowa, US*Ventura County, California, US*Las Venturas, San Andreas, a fictional city in Grand Theft Auto series of video games...
based in Leeds
Leeds
Leeds is a city and metropolitan borough in West Yorkshire, England. In 2001 Leeds' main urban subdivision had a population of 443,247, while the entire city has a population of 798,800 , making it the 30th-most populous city in the European Union.Leeds is the cultural, financial and commercial...
. Home and contents insurance is dealt with by AXA
AXA
AXA S.A. is a French global insurance group headquartered in the 8th arrondissement of Paris. AXA is a conglomerate of independently run businesses, operated according to the laws and regulations of many different countries. The AXA group of companies engage in life, health and other forms of...
whilst Legal & General
Legal & General
Legal & General Group Plc , commonly known as Legal & General, is a multinational financial services company headquartered in London, United Kingdom. Its products include life insurance, general insurance, pensions and investments. It has operations in the United Kingdom, Egypt, France, Germany,...
, whose mortgage book Northern Rock took over, arrange insurance and stock-market-based investments. Payment Protection Insurance
Payment Protection Insurance
Payment protection insurance, is an insurance product that is often designed to cover a debt that is currently outstanding Payment protection insurance, (also known as PPI, credit protection insurance, loan repayment insurance, not to be confused with income protection or credit card cover) is an...
(PPI) can be arranged with London-based Cardif Pinnacle.
In 2003, to free capital for its rapid growth in mortgage lending, the bank sold its credit card business to The Co-operative Bank
Co-operative Bank
The Co-operative Bank plc is a commercial bank in the United Kingdom and Guernsey, with its headquarters in Manchester.The bank markets itself as an ethical bank, and refuses to invest in companies involved in the arms trade, global climate change, genetic engineering, animal testing and use of...
for a profit of more than £7 million. Until November 2007 Northern Rock continued to sell credit cards under their own brand through The Co-operative Bank; the decision to stop was made before the 2007 crisis.
In 2006 the bank had moved into sub-prime lending via a deal with Lehman Brothers
Lehman Brothers
Lehman Brothers Holdings Inc. was a global financial services firm. Before declaring bankruptcy in 2008, Lehman was the fourth largest investment bank in the USA , doing business in investment banking, equity and fixed-income sales and trading Lehman Brothers Holdings Inc. (former NYSE ticker...
. Although the mortgages were sold under Northern Rock's brand through intermediaries, the risk was being underwritten
Underwriting
Underwriting refers to the process that a large financial service provider uses to assess the eligibility of a customer to receive their products . The name derives from the Lloyd's of London insurance market...
by Lehman Brothers.
Location
Regent Centre
Regent Centre is a large business park in Gosforth, Newcastle upon Tyne, England. The Centre is home to a variety of companies, including banking group Northern Rock whose Head Office is located on the site...
in Gosforth
Gosforth
Gosforth is an area of Newcastle upon Tyne, Tyne and Wear, England, United Kingdom, to the north of the city centre. Gosforth constituted an urban district from 1895 to 1974, when it became part of the City of Newcastle upon Tyne. It has a population of 23,620...
, Newcastle upon Tyne
Newcastle upon Tyne
Newcastle upon Tyne is a city and metropolitan borough of Tyne and Wear, in North East England. Historically a part of Northumberland, it is situated on the north bank of the River Tyne...
. It has customer contact centre operations at both Doxford International Business Park
Doxford International Business Park
Doxford International is a business park located at the A19 / A690 interchange on the outskirts of Sunderland, in the North East of England. Previously it was a greenfield site, it was designated as an Enterprise Zone in 1990 in response to the decline of the area's former ship building and coal...
in Sunderland and at its head office. The bank developed a site at Rainton Bridge, which it sold to Npower
Npower (UK)
RWE Npower plc is a UK-based electricity and gas supply generation company, formerly known as Innogy plc. As Innogy plc it was listed on the London Stock Exchange and was a constituent of the FTSE 100 Index...
.
Gosforth site
Northern Rock has recently completed the redevelopment of the Gosforth site, Northern Rock House, which saw the demolition of the original 1960s tower block during Spring 2006. A new tower block, simply known as The Tower, was completed in November 2008, originally intended to create 1500 jobs, and act as the main entrance and focal point of the company headquarters. This will now also likely be sold or leased as the additional space has become surplus to requirements. The local council, Newcastle City CouncilNewcastle City Council
Newcastle City Council is the local government authority for Newcastle upon Tyne, a city in Tyne and Wear, England. The council consists of 78 councillors, three for each of the city's 26 wards...
, purchased the building for £22 million, and leased it to a green support services company, Eaga
Eaga
Eaga plc was a British company supplying energy efficiency products. It was headquartered in Newcastle upon Tyne. In April 2011 it was acquired by Carillion.- History :...
(now Carillion Energy).
The Gosforth site currently consists of the Kielder and Prudhoe buildings, completed in the early 1990s, behind which lies the distinctive glass-fronted Alnwick building. The main Atrium reception is adjacent to this, opening out onto Baker Street, a large covered atrium that houses a restaurant, shop and on-site branch. A number of other buildings, all named after North-Eastern castles are joined to Baker Street.
Outside the UK
A sub-division in GuernseyGuernsey
Guernsey, officially the Bailiwick of Guernsey is a British Crown dependency in the English Channel off the coast of Normandy.The Bailiwick, as a governing entity, embraces not only all 10 parishes on the Island of Guernsey, but also the islands of Herm, Jethou, Burhou, and Lihou and their islet...
was established in February 1996, handling offshore savings and investment accounts. The Guernsey business was shut down on 2 September 2010.
Northern Rock opened a branch in Ireland on 16 November 1999 and the first branch in Northern Ireland
Northern Ireland
Northern Ireland is one of the four countries of the United Kingdom. Situated in the north-east of the island of Ireland, it shares a border with the Republic of Ireland to the south and west...
followed on 4 April 2007. The first branch of the bank opened in Denmark on 7 February 2007; however as part of the Government restructuring, the Danish operations ceased on 18 June 2008.
Corporate image
Red Box Design Group
Redboxdesign group is a design company which specialises in architecture and Interior design, as well as new media based in Newcastle upon Tyne, England, working both nationally and internationally.-History:...
designed all the currently standing buildings at the company's headquarters in Gosforth and have contributed to many of the other design aspects of the company, such as the in-branch styling. From 1 October 1997 until the government nationalisation, the bank used the symbol NRK on the London Stock Exchange.
Board of directors
Prior to the credit crisis the company had focused on developing its own staff and most appointments including the Chief Executive, were made internally.At the time of the 2007 financial crisis Matt Ridley
Matt Ridley
Matthew White Ridley, FRSL, FMedSci is an English journalist, writer, biologist, and businessman.-Career:...
was the Chairman and Adam Applegarth
Adam Applegarth
Adam J. Applegarth was the Chief Executive Officer of the Gosforth, Newcastle upon Tyne based Northern Rock bank, one of the first victims of the so-called subprime mortgage crisis...
was the Chief Executive. Ridley resigned in October 2007 and Applegarth resigned in November 2007, although the latter stayed on in a caretaker role until December 2007. The Chief Executive was Andy Kuipers, who joined the company in 1987, and retired on 31 August 2008.
In February 2008, Ron Sandler
Ron Sandler
-Early life:Sandler was born in Bulawayo, Southern Rhodesia in 1952 and has an undergraduate degree in engineering from Queens' College, Cambridge and an MBA from Stanford University.-Career in the financial sector:...
was appointed Executive Chairman by the government. Gary Hoffman became Chief Executive of Northern Rock in October 2008. He had previously been the vice chairman of Barclays and a former Managing Director of Barclaycard
Barclaycard
Barclaycard, part of Barclays Retail and Business Banking, is a global payment business. The Barclaycard was the first credit card introduced in the UK, coming into service in 1966. It enjoyed a monopoly until the introduction of the Access card in 1972....
. With the appointment of Gary Hoffman, Ron Sandler changed to a Non-Executive Chairman position.
Since the split of the bank into Northern Rock plc and Northern Rock (Asset Management)
Northern Rock (Asset Management)
Northern Rock plc is a British asset holding and management company which was split away from the Northern Rock bank in 2010. It is currently under public ownership, due to the bank's nationalisation in 2008...
plc on 1 January 2010, each company has its boards of directors.
On 4 November 2010 Northern Rock announced that Gary Hoffman has left the bank and is to move to NBNK Investments as CEO. NBNK Investments cannot table a bid for Northern Rock for a period of 12 months.
Northern Rock plc board as of 8 April 2010:
- Chairman: Ron Sandler
- Chief Executive: Gary Hoffman
- Chief Financial Officer: Jim McConville
- Executive Directors: Rick Hunkin
- Non-Executive Directors: Laurie Adams, Richard Coates, Mike Fairey, Mark Pain, Mary Phibbs
Sponsorship
The company sponsored many local sports clubs and events, including Newcastle United Football Club, Newcastle FalconsNewcastle Falcons
The Newcastle Falcons is an English rugby union team currently playing in the Aviva Premiership. The club was established in 1877 and played under the name of Gosforth Football Club until 1990. The name was then changed to Newcastle Gosforth and the club began to play at Kingston Park stadium in...
(rugby union
Rugby union
Rugby union, often simply referred to as rugby, is a full contact team sport which originated in England in the early 19th century. One of the two codes of rugby football, it is based on running with the ball in hand...
), Newcastle Eagles
Newcastle Eagles
Newcastle Eagles is a British Basketball League team from Newcastle upon Tyne. Since 2010 they have played all home games at the 3,000 capacity Sport Central arena at Northumbria University in the city...
(basketball), Durham
Durham County Cricket Club
Durham County Cricket Club is one of the 18 major county clubs which make up the English and Welsh national cricket structure, representing the historic county of Durham. Its limited overs team is called the Durham Dynamos. Their kit colours are blue with yellow trim and the shirt sponsor was...
and Middlesex
Middlesex County Cricket Club
Middlesex County Cricket Club is one of the 18 major county clubs which make up the English and Welsh domestic cricket structure, representing the historic county of Middlesex. It was announced in February 2009 that Middlesex changed their limited overs name from the Middlesex Crusaders, to the...
County Cricket clubs, professional golfer Paul Eales
Paul Eales
Paul Martyn Eales is an English professional golfer.Eales was born in Epping, Essex. He turned professional in 1985 and became a member of Europe's second tier Challenge Tour in 1990...
and the cycling festival Northern Rock Cyclone. The sponsorship of Newcastle United began in 2003, and was set to expire in 2010, before an extension to 2014. This extension included a get-out clause in June 2012, which was activated in November 2011. The current five year deal from 2005 to 2010 was worth £25 million.
In 2005, to coincide with the Spirit of the Tall Ships Festival, Northern Rock enlisted the help of Red Box Interiors to create a temporary art installation at The Baltic Centre for Contemporary Art
BALTIC Centre for Contemporary Art
The Baltic Centre for Contemporary Art is an international centre for contemporary art located on the south bank of the River Tyne alongside the Gateshead Millennium Bridge in Gateshead, North East England, United Kingdom...
on the Gateshead
Gateshead
Gateshead is a town in Tyne and Wear, England and is the main settlement in the Metropolitan Borough of Gateshead. Historically a part of County Durham, it lies on the southern bank of the River Tyne opposite Newcastle upon Tyne and together they form the urban core of Tyneside...
Quay of the Tyne
River Tyne
The River Tyne is a river in North East England in Great Britain. It is formed by the confluence of two rivers: the North Tyne and the South Tyne. These two rivers converge at Warden Rock near Hexham in Northumberland at a place dubbed 'The Meeting of the Waters'.The North Tyne rises on the...
. The art entitled "Northern Rock @ Baltic" included mobile light stem sculptures and large scale external graphics.
Northern Rock sponsors the North East Premier League
North East Premier League
The North East Premier League is the top level of competition for recreational club cricket in the North East of England, serving the counties of Durham, Northumberland and Tyne and Wear...
competition for recreational club cricket
Club cricket
Club cricket is a mainly amateur, but still formal, form of the sport of cricket, usually involving teams playing in competitions at weekends or in the evening. There is a great deal of variation in game format although the Laws of Cricket are always observed...
. In 2006 Northern Rock sponsored the All*Star Cup celebrity Golf match, which was shown on ITV
ITV
ITV is the major commercial public service TV network in the United Kingdom. Launched in 1955 under the auspices of the Independent Television Authority to provide competition to the BBC, it is also the oldest commercial network in the UK...
. The bank also sponsors a junior golf tournament, The Rock Junior Golf Festival, held at Matfen Hall
Matfen Hall
Matfen Hall is a 19th century country mansion in Matfen, Northumberland, England the seat of the Blackett Baronets and now also an hotel and country golf club. It is a Grade II* listed building....
.
In 2007, almost three weeks before the bank had to appeal to the Bank of England
Bank of England
The Bank of England is the central bank of the United Kingdom and the model on which most modern central banks have been based. Established in 1694, it is the second oldest central bank in the world...
for an emergency loan, the bank bought the home ground of Newcastle Falcons
Newcastle Falcons
The Newcastle Falcons is an English rugby union team currently playing in the Aviva Premiership. The club was established in 1877 and played under the name of Gosforth Football Club until 1990. The name was then changed to Newcastle Gosforth and the club began to play at Kingston Park stadium in...
Rugby Club, Kingston Park stadium
Kingston Park (stadium)
Kingston Park is a multi-purpose stadium in Kingston Park, Newcastle upon Tyne, England. It is used mostly for rugby union matches and is the home stadium of Newcastle Falcons. The stadium is also used for the Newcastle United Reserves to play their home matches...
for £15 million. In February 2008, documents relating to the sale came to light, attracting much criticism that the purchase has been made at a time of impending crisis. In late 2008 the bank sold Kingston Park Stadium to Northumbria University
Northumbria University
Northumbria University is an academic institution located in Newcastle upon Tyne in the North East of England. It is a member of the University Alliance.- History :...
for an undisclosed fee.
It was confirmed on 20 May 2008 that Northern Rock would continue to sponsor both Newcastle United and the Newcastle Falcons, the former due to the long term agreement between them and the club. The sponsorship agreement with the Falcons came to an end before the start of the 2010/11 season.
On 18 January 2010 Northern Rock announced that they had signed a new 4 year sponsorship deal with Newcastle United, worth between £1.5 million and £10 million, starting from the 2010/11 season.
Northern Rock Foundation
ITV plc
ITV plc is a British media company that operates 12 of the 15 regional television broadcasters that make up the ITV Network, the oldest and largest commercial terrestrial television network in the United Kingdom...
.
In April 1996, when the Building Society was considering demutualisation, plans were announced by the then chairman, Robert Dickinson, for the creation of the foundation. Since the official launch of the foundation in January 1998, it has steadily grown and expanded its activities. The Foundation's work is carried out by a professional staff team of 12 based in Gosforth. Previously in 2007 there had been 25 staff at the foundation. In 2003, along with a new logo and the introduction of new programmes, the Foundation moved to a new building – the renovated Old Chapel in Gosforth. At the end of 2006 the foundation received £28.2 million investment. By the end of 2007 £190 million had been donated to the foundation, by Northern Rock.
Nationalisation ended the covenant requiring Northern Rock to remit a share of profits to the Foundation. Instead, for the next three years the Foundation was to receive an annual £15 million payment from Northern Rock, whether it remained publicly owned or returned to the private sector. The Foundation's shares were to be cancelled and compensated in the same way as those of other shareholders. £7.3 million was awarded during the first 10 months of 2008, with an expected further £3.7 million before the end of the year.
Upon the sale to Virgin, the deals with the Northern Rock Foundation will be extended to at least 2013, giving Virgin and the Foundation time to agree how they will work together.
Subprime mortgage crisis and nationalisation
Bank of England
The Bank of England is the central bank of the United Kingdom and the model on which most modern central banks have been based. Established in 1694, it is the second oldest central bank in the world...
, to replace funds it was unable to raise from the money market. This led to panic among individual depositors fearing that their savings might not be available should Northern Rock go into receivership. This led to a bank run
Bank run
A bank run occurs when a large number of bank customers withdraw their deposits because they believe the bank is, or might become, insolvent...
– the UK's first in 150 years – where depositors lined up outside the bank to withdraw all of their savings as quickly as possible, particularly since everyone else was doing the same.
On 22 February 2008, the bank was taken into state ownership as a result of two unsuccessful bids to take over the bank, neither being able to fully commit to repayment of taxpayers' money within three years. The bank is managed at "arms length" by the government through UK Financial Investments Limited
UK Financial Investments Limited
UK Financial Investments Ltd is a company set up in November 2008 by the UK Government to manage its shareholding in banks subscribing to its recapitalisation fund. They include Lloyds Banking Group , Royal Bank of Scotland Group and Northern Rock...
.
The bank planned to repay the government debt within three to four years, primarily by encouraging mortgage customers to take their mortgage to another lender. Costs were also reduced by reducing numbers of staff. As of 3 March 2009, the bank was repaying the loan well ahead of target, owing a net balance of only £8.9 billion of the loan which stood at £26.9 billion at the end of 2007.
By October, customers appeared to be regaining confidence in the bank, when it emerged that there had been a surge in the number of new accounts which had been opened. People perceived Northern Rock as a safe place to put their money, given that it is currently government owned. However there is no guarantee that if Northern Rock was to fail that the government would top-up any compensation over and above the standard £85,000 offered by the Financial Services Compensation Scheme
Financial Services Compensation Scheme
The Financial Services Compensation Scheme is a "statutory fund of last resort" in the United Kingdom, set up under the Financial Services and Markets Act 2000 to compensate customers of "authorised financial services firms" in the event of their insolvency. It consolidated previous compensation...
.
Former shareholders and hedge funds also took legal action in January 2009 to get a fair level of compensation for their shares; the shareholders lost the case. They also lost their appeals in the British courts, but hope to take the case to the European courts. On 8 December 2009, it was announced that the valuer Andrew Caldwell had decided that the Northern Rock shareholders should get no compensation.
On 23 February 2009, Northern Rock announced that they would be offering £14 billion worth of new mortgages, over the next two years, as a part of their new business plan. This new lending will be partly funded by an increase in the government loan, a reversal of previous strategy to pay the loan off as quickly as possible by actively encouraging mortgage customers to leave when their mortgage deal matures. The reason for this change was government policy to increase the availability of credit. This £14 billion will be split into £5 billion in 2009 and £9 billion in 2010.
Potential buyers for the bank include Virgin Money
Virgin Money
Virgin Money is a UK-based financial services company owned by the Virgin Group and founded by Sir Richard Branson in March 1995. It was originally known as Virgin Direct, and pioneered index tracking by launching a value Personal Equity Plan into the market. In the 2000s Virgin Money expanded its...
, National Australia Bank
National Australia Bank
National Australia Bank is one of the four largest financial institutions in Australia in terms of market capitalisation and customers. NAB is ranked 17th largest bank in the world measured by market capitalisation...
, NBNK
NBNK
NBNK Investments plc is a financial investment company formed by Lord Levene and a consortium of senior business figures in 2010. The aim of the company is to build a new large UK retail bank primarily through the acquisition of other banks.- History :...
, Santander
Grupo Santander
The Santander Group is a banking group centered on Banco Santander, S.A., the largest bank in the Eurozone and one of the largest banks in the world in terms of market capitalisation. According to Forbes Magazine Global 2000, it is the 13th largest public company in the world...
, Blackstone
Blackstone Group
The Blackstone Group L.P. is an American-based alternative asset management and financial services company that specializes in private equity, real estate, and credit and marketable alternative investment strategies, as well as financial advisory services, such as mergers and acquisitions ,...
, Tesco
Tesco
Tesco plc is a global grocery and general merchandise retailer headquartered in Cheshunt, United Kingdom. It is the third-largest retailer in the world measured by revenues and the second-largest measured by profits...
, TowerBrook
TowerBrook Capital Partners
TowerBrook Capital Partners L.P. is a private equity firm based in the United Kingdom and United States. Their offices are in London, San Francisco, and New York City. TowerBrook seeks for complex, control-oriented investments in large and middle market companies in European and North American...
, Yorkshire Building Society
Yorkshire Building Society
The Yorkshire Building Society is the second largest building society in the UK, with its headquarters in Bradford, West Yorkshire, England. Assets now exceed £20 billion....
and Coventry Building Society
Coventry Building Society
The Coventry Building Society is a building society based in Coventry, England. It is the third largest in the United Kingdom with total assets of approximately £22.3 billion at 31 December 2010. It is a member of the Building Societies Association.-History:...
. Former Chancellor of the Exchequer
Chancellor of the Exchequer
The Chancellor of the Exchequer is the title held by the British Cabinet minister who is responsible for all economic and financial matters. Often simply called the Chancellor, the office-holder controls HM Treasury and plays a role akin to the posts of Minister of Finance or Secretary of the...
Alistair Darling
Alistair Darling
Alistair Maclean Darling is a Scottish Labour Party politician who has been a Member of Parliament since 1987, currently for Edinburgh South West. He served as the Chancellor of the Exchequer from 2007 to 2010...
had stated that he was in no "hurry" to return the bank to the private sector. In July 2010, it was reported that a consortium
Consortium
A consortium is an association of two or more individuals, companies, organizations or governments with the objective of participating in a common activity or pooling their resources for achieving a common goal....
of City executives
City of London
The City of London is a small area within Greater London, England. It is the historic core of London around which the modern conurbation grew and has held city status since time immemorial. The City’s boundaries have remained almost unchanged since the Middle Ages, and it is now only a tiny part of...
were gathering to place a bid for Northern Rock.
The bank was split into two parts, assets
Northern Rock (Asset Management)
Northern Rock plc is a British asset holding and management company which was split away from the Northern Rock bank in 2010. It is currently under public ownership, due to the bank's nationalisation in 2008...
and banking on 1 January 2010. On 15 June 2011, it was announced that the bank was to be sold to a single buyer in the private sector by the end of the year.
On 22 March 2011, the bank issued its first mortgage securitisation since the 2007 recession which nearly brought the bank down.
On 17 November 2011 it was announced that Virgin Money were going to buy Northern Rock plc for £747 million.
See also
- Northern Rock (Asset Management)Northern Rock (Asset Management)Northern Rock plc is a British asset holding and management company which was split away from the Northern Rock bank in 2010. It is currently under public ownership, due to the bank's nationalisation in 2008...
- Nationalisation of Northern RockNationalisation of Northern RockIn 2008 the Northern Rock bank was nationalised by the British Government, due to financial problems caused by the subprime mortgage crisis...
- Partnership House
- Granite (Northern Rock vehicle)Granite (Northern Rock vehicle)Granite is a securitisation vehicle created by the British bank Northern Rock, based in Guernsey.The purpose of Granite is to parcel up the mortgages provided by the bank and sell the value to investors...
- UK Financial Investments LimitedUK Financial Investments LimitedUK Financial Investments Ltd is a company set up in November 2008 by the UK Government to manage its shareholding in banks subscribing to its recapitalisation fund. They include Lloyds Banking Group , Royal Bank of Scotland Group and Northern Rock...
- Banking (Special Provisions) Act 2008Banking (Special Provisions) Act 2008The Banking Act 2008 is an Act of the Parliament of the United Kingdom that entered into force on the 21 February 2008 in order to enable the UK government to nationalise high-street banks under emergency circumstances by secondary legislation...
External links
Official websites- Northern Rock plc (bank)
- Northern Rock (Asset Management) plc
- Northern Rock Ireland
- Northern Rock Foundation
Other websites