Rock’s shares are suspended
SHARES in stricken North East bank Northern Rock were suspended today after the Government moved to nationalise the lender.
Trading in the bank’s shares - which closed at 90p on Friday - was halted on the London Stock Exchange, leaving shareholders anxious over the amount, if any, of compensation they would receive.
The Government said yesterday it would appoint an independent valuer to decide the level of compensation.
Chancellor Alistair Darling will put forward emergency legislation in Parliament today to nationalise Northern Rock, with a Commons statement due later today.
Mr Darling today defended the decision, saying the move offered the best value for taxpayers’ money.
But he said the measure was only for the short term, and the future of the bank lay in the private sector.
Emergency legislation will be put before Parliament today to bring the ailing bank under “temporary public ownership” after the Government decided that proposals for a takeover of the bank would not deliver “sufficient value for money” for the taxpayer.
The decision comes after a weekend in which ministers had the chance to examine revised proposals from the two surviving bidders - Sir Richard Branson’s Virgin Group and Northern Rock’s own management team.
While ministers deal with the fall-out from the decision today, Ron Sandler - the man charged with running the nationalised bank - will visit Newcastle in a bid to reassure its 6,000 staff and Northern Rock representatives.
Political opponents said the move to public ownership for the Rock marked the death of the Government’s reputation for economic competence. But Mr Darling insisted it was the best way to safeguard people’s money.
Northern Rock was forced to seek a Bank of England bail-out last September as its borrowing costs soared amid the credit crunch - sparking the first run on a UK bank in more than 140 years.
Today Andrew Priestley, a stockbroker for Middlesbrough-based Redmayne-Bentley, said the affair had heaped “major embarrassment on the government”, which is likely to face legal action from disgruntled shareholders.
He said: “It is difficult to see a clear way forward and to estimate how long Northern Rock will be in nationalisation.
“If trading reports from the banking sector during the next few weeks are gloomy, it could be hard to attract another private investor in the current market conditions.”
This time last year, the bank was worth £5.3bn compared with £375m today.
Page two: Your questions on Northern Rock answered.
