Northern Rock in the spotlight
THE Government’s handling of the Northern Rock bank nationalisation a year ago comes under close legal scrutiny this week as angry shareholders seek a judicial review in the High Court.
Shareholders claim their investments will effectively be rendered worthless because the Treasury is acting on the basis of false valuation criteria contained in the statutory provisions enabling the Government takeover to go ahead. As a result, they say, little or no compensation will be payable for the expropriation of their shares.
In a three-and-a-half-day court hearing beginning in London tomorrow, judges will hear arguments drawing a contrast between the Government’s conduct in the Northern Rock rescue and its subsequent acquisition of stakes in other banks, such as Bradford & Bingley, whose shareholders were not wiped out.
Shareholders say the Treasury’s share valuation criteria assumed the bank was in administration, was no longer a concern and was no longer receiving financial assistance from the Bank of England or the Treasury when it was nationalised. The criteria were false, they argue.
Northern Rock’s move to call on the Bank of England as lender of last resort led to the first run on a UK bank in nearly 150 years in late 2007.
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