Northern Rock will be split, but stay in North East

Oct 28 2009 By William Green, The Journal

THE sale of Northern Rock will be kick-started today with Brussels approving its split into a "good" and "bad" bank.

Business and political chiefs gave a cautious welcome to news the European Commission is today set to approve the split – which is likely to take place in the New Year and could see the "good" part of the bank sold within months.

But they stressed keeping the Rock in the North East and securing jobs was vital amid signs the "good bank" could go to a new entrant to the banking sector, such as Tesco or Virgin Money.

Chancellor Alistair Darling told The Journal last week Northern Rock could be the "foundation of something bigger" able to take on the six dominant players in the UK banking sector.

Last night, Government sources said: "We’re clear we want to see new entrants in the banking market.

"The split will get us to a point where we can start exploring the options for an eventual sale."

But it is understood the Government would not want to see the North East "heart" of Northern Rock being pulled out by any potential buyer. Announcements about RBS and Lloyds selling parts of their businesses to secure European state aid approval are also expected in the coming weeks.

Sources say three new UK banks can be expected within five years because of moves designed to improve competition.

TUC regional secretary Kevin Rowan said: "We would hope that this puts the bank in a position where it can consolidate its position as an important part of the financial economy. It remains hugely important to the region, both in the profile of the region but providing that vital employment base.

"We welcome this news and hopefully we will see the bank continue to prosper."

Durham City MP Roberta Blackman-Woods, assistant to Regional Minister Nick Brown, said the Government was trying to ensure there was a secure future for Northern Rock. She said: "I have certainly heard the Chancellor and regional minister say that maintaining those jobs in the North East is really important. So it would surprise me if at the end of the day they agreed to sale on to a bidder who wasn’t going to give some sort of guarantee.

"But it is really about securing the future of Northern Rock, which I think would be welcome."