Result : Hoffman waives payments

The Journal in Newcastle is reporting that the outgoing chief executive of Newcastle-based nationalised bank Northern Rock has bowed to pressure by waiving his salary, pension and benefits for the period of his gardening leave.


Robin Ashby commented : "I'm delighted that Mr Hoffman has taken this sensible decision, which shows his sensitivity to public opinion. Although we do not want our bank taken over by an unknown third party, if that happens and Mr Hoffman again becomes involved with the running of Northern Rock we will be able to have greater confidence in him than if he had trousered the cash."

Northern Rock Chief Executive steps down

Northern Rock today confirmed Gary Hoffman has stepped down as chief executive with immediate effect.

In an interview with the Financial Times, Robin Ashby said on behalf of small shareholders : “Bankers are still looking at the banks as cash cows to be milked rather than someone else’s property to be tended. I’m told Ron Sandler has said that the half million pound pay off package is perfectly normal.

“That’s the problem. Bankers just don’t get it. It was perfectly normal for them to get bonuses for doing their job or for running someone else’s company into the ground. It was perfectly normal to treat themselves to all sorts of perks. But it isn’t now. It isn’t acceptable to the large numbers of people about to loose their jobs with only minimal statutory terms.

“It’s said that Mr Hoffman is going to work for someone else who wants to buy Northern Rock and he has to do on this obscenely remunerated ‘gardening leave’ because he has access to priviledged information.  But what is perfectly normal outside the gilded world of bankers is a clause in the contract to stop someone going of to use that information for a year. So why isn’t this applied here?

“Mr Hoffman should be made to work his notice like anybody else.”

Robin Ashby also echoed the opinion poll published in today's Journal newspaper showing that the first choice for 47% of local people is that Northern Rock should become a Building Society again. "This is exactly in line with what many small shareholders have told us. They would like their shares back, or proper compensation, but many would be willing to forego this if the Rock became a building society again."

Only 27% of respondents said that their first choice was to see Northern Rock flogged off privately as a bank.

Increase in depositor protection levels

Lord Moonie (Labour)

To ask Her Majesty's Government when they plan to direct the Financial Services Authority to implement the European Union-wide deposit protection limit of €100,000 under the Deposit Guarantee Schemes Directive (94/19/EC, as amended by Directive 2009/14/EC).

• Hansard source (Citation: HL Deb, 21 June 2010, c141W)

Lord Sassoon (Commercial Secretary, HM Treasury; Conservative)

The amended Deposit Guarantee Schemes Directive (Directive 2009/14/EC, amending Directive 94/19/EC) increases the coverage limit for deposit guarantee schemes to €100,000 from 31 December 2010. The coverage limit for deposits under the Financial Services Compensation Scheme will therefore be increased from this date. The Financial Services Authority plans to issue a consultation in October 2010 on increasing the coverage limit to the equivalent of €100,000.

Increase in depositor protection levels

Lord Moonie (Labour)

To ask Her Majesty's Government when they plan to direct the Financial Services Authority to implement the European Union-wide deposit protection limit of €100,000 under the Deposit Guarantee Schemes Directive (94/19/EC, as amended by Directive 2009/14/EC).

• Hansard source (Citation: HL Deb, 21 June 2010, c141W)

Lord Sassoon (Commercial Secretary, HM Treasury; Conservative)

The amended Deposit Guarantee Schemes Directive (Directive 2009/14/EC, amending Directive 94/19/EC) increases the coverage limit for deposit guarantee schemes to €100,000 from 31 December 2010. The coverage limit for deposits under the Financial Services Compensation Scheme will therefore be increased from this date. The Financial Services Authority plans to issue a consultation in October 2010 on increasing the coverage limit to the equivalent of €100,000.

Taxpayer liabilities for Northern Rock down again

The Government has quietly announced that after 2 November 2010, it is removing the guarantee of the wholesale deposits liabilities of Northern Rock plc (excluding certain fixed term deposits existing as at 1 January 2010)

This will reduce what's called the "contingent liability" - the theoretical amount that the Government would have to pay out if the company went bust - from £60 million to £16 million, and as products mature this will decrease - to zero by the end of 2012.

Another sign of the return to health of our stolen business.

"Remorse" of ex Northern Rock Chairman

See front page of today's Journal.

But doesn't reveal what he could and should have done differently.

He is quoted as saying;

"I enormously regret what happened at Northern Rock. It's an incredibly painful memory for me and it's something that I will live with for the rest of my life. I have nothing but remorse for my role in what happened. I've apologised and explained as much as I can what happened before the Treasury Select Committee.

"We were all taken by surprise by that. there was almost nobody who saw it coming. Those who did were not in the right place to warn everyone else. Northern Rock ended up suffering a fate no different from any other mortgage bank. They all disappeared as a result of the crisis, and I learnt a lot from that."

Apparently he says he now knows that "the only thing I'm good at is writing."

Editor's notes ;
1. Mr Ridley is currently promoting a book.
2. Robert Peston was warning about potential problems at Northern Rock even before he went to the BBC.
3. Mr Ridley was all but invisible to the investors and the general public during the whole crisis. The chairman of a public company is generally expected to be its public face.
4. Building Societies who built their businesses on prudent mortgage lending and not on fancy financial instruments weathered the storm.
5. Mr Ridley was paid £300,000 per annum to know better than the rest of us.

Newcastle Building Society "vulnerable"

Societies' losses in commercial arena should be limited
Mortgage Strategy, Monday 23 August 2010
http://www.mortgagestrategy.co.uk/latest-news/societies-losses-in-commercial-arena-should-be-limited/1017299.article
Fitch Ratings says improved management means building societies are less likely to face commercial real estate losses in 2010 compared with 2009. It says societies with a stable outlook are not expected to see their ratings affected by commercial ex-posure. Mutuals with a negative out-look such as Nationwide Building Society, Newcastle Building Society and West Bromwich Building Society, which are heavily reliant on commercial loans, are vulnerable.

Government spurns remutualisation

Secretary of State for Business Vince Cable has announced that the coalition government would be seeking to sell Northern Rock to the market. This is of course an about face to where Vince and his Lib Dem team were when they were writing their manifesto.

Michael Stephenson, General Secretary of the Co-operative Party, who are running a "The feeling is mutual" campaign, said :

"The ConDem Coalition has failed its first big test on co-operatives after less than 3 months.  By reneging on their commitment to re-mutualise Northern Rock, Vince Cable has shown that their devotion to a new approach to the economy is just a sham.

"Just like David Cameron's Big Society, this is a Big Con.  They are dumping all of their promises one by one and showing that they are just like the last Conservative Government which de-mutualised all of our building societies."

Jim Pickard's blog in the Financial Times criticises re-mutualisation.
http://blogs.ft.com/westminster/2010/08/the-case-against-turning-northern-rock-into-a-mutual/

Robin Ashby has said on a number of occasions in the media that if shareholders do not receive proper compensation (which Governments have refused to do) then the next best option is to give us our shares back. Although we would be heavily diluted as a result of the new shares that the Government has created for itself, we would still have some ownership and value, which are important to NRSSG members. he has however also pointed out that a number of members had been against demutualisation in the first place, so if Northern Rock was turned back into a building society they would consider honour was satisfied even though they had been deprived of value.

Good bank, bad bank both making profits

In the last couple of weeks it has become clear that both parts of the old Northern Rock are now making a profit.

As we've repeatedly said, this business will make a profit for the taxpayer - at the expense of the small shareholders who were treated differently from those in RBS and Lloyds.

Or a form of discrimination...

Former Rock director Jones banned for life, fined

According to a report in The Guardian on line (http://bit.ly/9194cm) the former finance director of Northern Rock, David Jones, today hit out against the Financial Services Authority as he was handed a life-time ban and fined £320,000 for allowing the bank to report mortgage arrears figures that were lower than they should have been.

Jones said he would now "pursue opportunities either in an advisory or full-time basis" as the ban by the City regulator only stops him taking on roles in a senior position that requires the FSA's authorisation.

The FSA concluded that Jones lacked integrity after he agreed in mid-January 2007 to allow false mortgage arrears to appear in an explanatory text in the annual report. After Northern Rock was nationalised in February 2009 he remained with the bank in senior role and but left in April 2010 shortly after his close former colleague, David Baker, who had been deputy chief executive, was fined £504,000 and barred from working in the industry for misreporting the same arrears figures. 

When the FSA published its sanctions against Baker it also fined Northern Rock's former managing credit director Richard Barclay £140,000 and gave him a less draconian ban by prohibited from performing any role with "significant influence" at a firm regulated by the watchdog.

Robin Ashby commented ; "As with Baker, the FSA has quite correctly  taken a hard line, and I hope that others learn this lesson very well.  The fine is severe, but the damage to his reputation is greater, and I hope that anyone seeking to pay him for his advice in the future notes the disasterous effect that his approach had when he was in a top position at Northern Rock."

"Unquantifiable" indemnities granted to Directors

The question we're entitled to ask is : Why aren't such indemnities procured commercially under standard Directors and Officers Insrance policies?

TREASURY MINUTE

INTEGRATION OF NORTHERN ROCK (ASSET MANAGEMENT) AND BRADFORD 7 BINGLEY;

INDEMNITIES TO DIRECTORS

Dated 8 July 2010


As announced on 24 March 2010 by the then Chancellor of the Exchequer, Northern Rock (Asset Management) and Bradford & Bingley will be integrated under a single holding company (HoldCo) wholly owned by HM Treasury.

Under the new structure Northern Rock (Asset Management) and Bradford & Bingley will be wholly owned subsidiaries of HoldCo, with all three companies sharing the same board structure.

HM Treasury intends to provide, from August 2010, certain guarantees in respect of the indemnities which will be issued to the directors of the three entities which indemnify the directors against liabilities and losses incurred in the course of their duties as directors. Payment under the guarantee will only arise if the companies are unable to satisfy their obligations under the indemnities.

The following guarantees will be provided by HM Treasury:

Guarantees to support the indemnities issued by HoldCo to its directors;

Guarantees to support the indemnities issued by Bradford & Bingley to the directors of Northern Rock (Asset Management) joining its board;

Guarantees to support the indemnities issued by Northern Rock (Asset Management) to the directors of Bradford & Bingley joining its board.

HM Treasury believes that such arrangements are appropriate to ensure that a member of a public corporation who has acted honestly will not have to meet out of his or her own personal resources any personal civil liability which is incurred in the execution or purported execution of his or her board functions, save where the loss is incurred as a result of, or attributable to, any dishonest, fraudulent or reckless act or omission byt the director or in respect of which indemnification is prohibited by law or regulation.

These indemnities are unquantifiable

"Bad bank" burden on taxpayer declining

In recent news strories, The Journal has reported that Northern Rock (Asset Management) plc is now making  a profit.

Since 24 May 2010, retail deposits of over £50,000 with Northern Rock plc have no longer been guaranteed by the taxpayer.

As a result, the contingent liability on the taxpayer has been reduced by £2.8 billion.

There is still a contingent liability of £2.9 billion for fixed term deposits of over £50,000, but this will devline as they mature.

All of this supports the contention that we have long made at NRSSG that the taxpayer was likely to come out of the Northern Rock intervention with a profit - which is why we shareholdes should be treated fairly.

News from NRSAG/UKSA

Northern Rock Shareholders' Action Group   Newsletter No. 66

In This Issue Northern Rock Valuer's Final Assessment Notice Did investors have the correct information on which to base their decisions? What action can you take? Update on legal case Deregistration of 'free' UKSA memberships Support, funding and donations Please advise address changes On-going Chairmanship  Quick Links Action Group Details and Registration   Campaign Donation   About UKSA   Address changes email address   Template letter to Valuer    Mr Caldwell's email address   Contact details for your MP

Northern Rock Valuer's Final Assessment Notice You will no doubt now be aware that on the 30th of March, Andrew Caldwell announced his unsurprising decision to value our former shareholding in Northern Rock as worthless.   In his Final Assessment Notice, he quotes the artificial valuation assumptions on which he is bound by law to base his valuation. He is not bound though by moral or professional standards to accept such terms but has chosen to accept them nonetheless.   This latest statement is no different to that given by him in December 2009 where Mr Caldwell requested representations to be made to him, representations on behalf of well over 130,000 small shareholders that appear to have fallen on deaf ears.   As invited by Mr Caldwell, we will be seeking reconsideration of the nil valuation with the hope that such requests receive the required consideration although it would seem that, as long as the Governments artificial terms of reference are allowed to stand in law, Mr Caldwell having accepted the appointment of valuer, may have no choice but to choose law over moral obligation.   You can also take action to further represent your views to Mr Caldwell, which we have detailed below.   Only the day before Mr Caldwell's statement, the Chancellor stated that Northern Rock had enough Capital: the Special Liquidity Scheme announced only weeks after Nationalisation of Northern Rock would have provided the liquidity required to continue as a "Going Concern". This key assumption required to arrive at a fair value was not allowed under the Compensation Scheme Valuation Order.   With over £500 Billion available under the Special Liquidity Scheme and Inter Bank guarantees from April 2008 Northern Rock would have continued as a solvent, liquid, profitable entity, therefore supporting the small shareholders claim that their Human Rights have been violated firstly by the Compensation Order and finally now by Mr Caldwell's report. Did investors have the correct information on which to base their decisions? Only two weeks after Andrew Caldwell valued the former shareholding in Northern Rock as worthless, the small shareholders now find the information on which they based their investment decisions was flawed.   The FSA announced their fines of Mr Barclay and Mr Baker for their part in manipulating figures on the performance of Northern Rock's mortgage book but as yet we have to hear the involvement of Mr Applegarth. So far, Mr Applegarth has been legally gagged and prevented from commenting, but did he and his fellow Directors also know about this manipulation or were Mr Barclay and Mr Baker really alone in this decision-making?   Where were the regulators in analysing their information? Or have we forgotten the regulators involvement, or lack of, in the lead up to the financial crisis. Or the legislators, including Gordon Brown, who as Chancellor changed the limits applicable to the borrowing capacities of banks and building societies 12 years ago.   Where 'fairness' now appears to be a political buzzword in campaigning, the small shareholders would like to see evidence of fairness in practice, not just in a manifesto for votes. It would seem that the government would lay the blame solely at the door of 'greedy bankers'. Whilst this may be true in part, the outgoing Government bred the said greed in pedigree conditions.   These latest fines fully vindicate the small shareholders claims of ill treatment not only by the governance and regulatory framework but also by the institutions in which they invested. Such governance turned a blind eye and failed miserably to protect the rights of investors large and small. What action can you take? As with his December statement, Mr Caldwell has invited former shareholders to make share their views and thoughts through written representations to him on why he should reconsider this assessment. To reiterate from our last update, it is important to recognise that this news completely vindicates our assertion that the terms of the compensation order were manifestly unfair, and the fact that this valuation has finally been released will remove much of the uncertainty that the government and its lawyers have hidden behind in their (now demonstrably false) allegations that the terms of their compensation order adequately allow for the payment of fair compensation to shareholders. To this end, former shareholders should write to Mr Caldwell as he has invited them to do so, by the 5th of May 2010. Former shareholders should also make representations to their MPs who sanctioned the legislation that brought about the demise of our assets. To assist, we have prepared template letters for the valuer. Please feel free to edit this template and include your own thoughts, comments, frustrations and anger in your own letters. The template can be found on the website at: www.uksa.org.uk/valuerletter    Your letters can be also be emailed to Mr Caldwell at: northern.rock@bdo.co.uk   You can locate the contact details for your MP at: http://findyourmp.parliament.uk/ Update on legal case: Application to European Court of Human Rights (ECHR) Following the announcement from the Supreme Court that it would not be accepting the application made by Northern Rock shareholders to appeal the earlier decision of the High Court, the legal case continues to make its way into the European Court of Human Rights in Strasbourg, although it could take up to 3 years for the case to be heard and a decision known. We will continue to support the small shareholders, headed by lead plaintiff Dennis Grainger, who are now to progress their case to Strasbourg, arguing the case "afresh" (as opposed to an appeal), in a court where the judges have historically had no compunction in making EU-member governments such as ours accountable for the violations of the human rights of EU citizens.  Note that as this will be a lengthy process, you may receive less frequent newsletters in future from us. Deregistration of 'free' UKSA memberships We continue to extend our thanks and gratitude to all those supporters who have donated to this campaign. Some of you will have donated based on receiving a complementary 'free' membership of the UK Shareholders Association (UKSA), reverting in subsequent years to being fully paid up members of UKSA upon payment of the annual fee (currently £50). It is important to remember that this campaign is run and operated as a separate committee of UKSA, the independent not for profit organisation who represent the views and campaign on behalf of us all, the small private shareholder. It has recently come to light that the UKSA Board feel they cannot recognise such free members and have written to 'free' members in effect canceling their membership, although they have offered fully paid up membership upon payment of £25 to UKSA for this. If you are a supporter whose membership has been deregistered in this way and you do wish to remain a member of UKSA, please contact Chris Hulme, the Co-Chairman of this campaign on 0161 434 6016 or by email to northernrock@claytonhulme.co.uk Irrespective of your 'membership status' with UKSA, as a supporter of this campaign, we value you input, support and generosity and we will not deregister you from our contact list or this campaign (unless you wish to do so). Support, funding and donations Thank you to all those supporters who have donated to support this campaign. More than sixteen thousand supporters have now generously donated, and we are very grateful for their financial help that not only helps fight the legal battle but also covers some of the costs of keeping you informed of progress. There are many former shareholders that we haven't yet been able to reach. To this end, we would ask that you forward on this update to any friends, family and work colleagues who you feel may have an interest in the case or may know someone who would. Whilst the Government has significant resources to defend our case against them, we are operating on a voluntary basis and still need donations and financial support to continue the fight on your behalf and any donations are gratefully received. Donations can be made directly to UKSA at the following link where you can also find all of the updates on this case: www.uksa.org.uk/NorthernRock.htm We will provide our next update as further news and useful information arises. Until then, thank you once again for your support. Template letter to Andrew Caldwell [Insert your name and address here]   Andrew Caldwell Northern Rock Valuer c/o BDO LLP 55 Baker Street London W1U 7EU   27 April 2010   Dear Mr Caldwell Thank you for your latest letter concerning your so-called "independent" valuation and your suggestion that my former shareholding in Northern Rock is worthless. It is strangely reminiscent of your letter in November last and you appear to have taken no notice whatsoever of my comments sent to you at that time. You have maintained from the beginning that your role was "to conduct a fair, open and transparent valuation", in fact your paymasters have used the term 'fair' on many occasions of late, more recently in their campaigning for MY vote in the General Election. For fear of repeating my comments in my last letter to you, how on earth could you proceed with the work as an "independent valuer" when the Government had set the valuation rules in contradiction to any possible independence? This repetition is absolutely required. My comments in my previous letter appear to have fallen on deaf ears, as you have made no attempt to consider my views, or any of the views of the small shareholders in your assessment. I suspect that this letter will also fall on the same deaf ears. It therefore continues to be unforgivable and questionably professional of you seemingly to set aside a moral standpoint in order to undertake paid work such as this. I call upon you to inform your paymaster and employer that you cannot fulfil this moral duty that affords ALL parties an even, balanced and fair view of the assets of the business that was Northern Rock plc. I therefore implore you to show full understanding and apply moral fibre in your final deliberations and, at the very least, advise your paymasters in your report that, without the said assumptions being forced into the deliberation, you would have no hesitation in finding that there was a substantial value of company net asset worth belonging to us as shareholders at the time Her Majesty's Government confiscated OUR property. Yours sincerely Please advise address changes Please advise any postal or email address changes to uksa3@btconnect.com (telephone 0208-468-1027). It is particularly important to do so for email address changes otherwise we may lose touch with you altogether. And please include some other identification such as your postal post code and your name so we can identify you in our database when sending us such communications. On-going Chairmanship Chris Hulme and Shum Ghumman are continuing to act as co-chairman of this action group and their contact details are: Shum Ghumman                                     Chris Hulme T: 07872 617 737                                  T: 07775 794 291 On behalf Northern Rock Shareholders Action Group Email: uksa3@btconnect.com Web: www.uksa.org.uk Note that all previous "Update" notes on Northern Rock that we have issued are present on the following web site page: www.uksa.org.uk/NorthernRock.htm . PLEASE DO NOT REPLY TO THIS EMAIL TO NOTIFY CHANGES OF EMAIL OR POSTAL ADDRESSES OR FOR ROUTINE INQUIRIES. THOSE SHOULD BE SENT TO: uksa3@btconnect.com, Tel: 020-8468-1027

Stolen

Finance chief David Jones leaves Northern Rock


Stolen from The Journal Apr 21 2010 Story by Matt McKenzie



A FINANCE chief under investigation as part of a City watchdog inquiry into mortgage figure manipulation at Newcastle-based lender Northern Rock has left the business, it has emerged.



The bank said David Jones had quit the asset management side of the company with immediate effect ``to focus on an ongoing Financial Services Authority (FSA) investigation into matters relating to a period before the company entered public ownership".



It is believed the regulator is investigating Mr Jones in relation to a recent inquiry into misleading mortgage arrears figures at the lender, which last week resulted in a near-record fine for its former deputy chief executive.



Details of the FSA investigation emerged when former deputy chief executive David Baker was fined £504,000 and banned from working in any regulated activity after the watchdog found that he misled shareholders and analysts by quoting inaccurate data.



The fine is believed to be the highest ever for this type of offence and one of the largest handed to an individual.



A £140,000 fine was also handed to Northern Rock’s former managing credit director Richard Barclay for failing to ensure the accuracy of the figures.



Newcastle-based Northern Rock collapsed into public ownership in early 2008 after it was forced to seek emergency funding from the Bank of England and suffered the first run on a UK bank for 150 years.



The bank has now been split into so-called ``good" and ``bad" banks. The former contains £10.3 billion of the mortgage book and £19 billion in retail savings and is set to return to the private sector.



The latter is the asset management business, which holds approximately £50 billion of residential mortgages and unsecured loans of £3.9 billion. This business also holds the Government loan and does not offer any new mortgage lending.



A statement from the company said Hugh Graham, current head of its treasury operation, has been appointed as its interim chief financial officer, subject to FSA approval.

Another top Rock director being probed?

According to today's Sunday Times, another senior executive at Northern Rock at the time of the crash is under investigation by the Financial Services Authority. The FSA's judgement about heavily-fined and banned David Baker mentions a "senior and suitably qualified colleague" who "also expressed the view that there was no obligation to amend statements in the annual 2006 accounts, which were about to be published" about nearly 2000 impaired mortgages.

The Sunday Times alleges this person is former Finance Director David Jones, who was close to Adam Applegarth at the time. Nobody is saying anything on the record. This modern trend of "spinning by leak" is reprehensible and unfair. But the emerging facts about Northern Rock imply a failure of regulation, and one wonders if there is the possibility of Equitable Life - type legal action against the company, the Government and individuals. No doubt that is something the big corporate shareholders are pondering even as this is written!

Massive fines for faulty bankers

The Financial Services Agency has hit the former Deputy Chief Executive of Northern Rock with a fine of over £500,000 - and a colleague in charge of the Debt Management Unit £140,000. The full judgements and a news release can be found on the FSA website.

David Baker, 57 next month, retired from Northern Rock in early March 2008. At the time the chairman Ron Sandler praised his "immense contribution to the business" (For which he was paid in excess of £530,000 a year. He sold Northern Rock shares for £1,200,000 in January 2007. The shares started to slide shortly thereafter down to their present worthlessness. The zeroes seem to have been unequally distributed...)

Baker has been fined and banned "as a result of Mr Baker's misconduct as an approved person under section 59" of the Financial Services and Markets Act 2000.

He was found guilty of a lack of integrity in that he knew in December 2006 that 1,917 loans had been omitted from the impaired loans figures but he did nothing about it, and then made misleading statements.

Richard Barclay, who left Northern Rock last month, knew that the firm’s arrears position enabled senior management within NR, analysts and the FSA to form a view of NR’s asset quality, but failed to ensure that the management information reported by the DMU was accurate despite warning signs at an early stage.

Robin Ashby comented "This is outrageous, but the punishment has been savage. There are immediate questions that must be answered:

"Did anybody else in Northern Rock know about this deception, and if not, why not? What did they know and when did they know it? Who else is to be held to account?

"Who will pay the fines? Are they personal - if so, they are about a year's wages. If not, are they being paid by the company, in effect the taxpayer?

"And what actions will the company now take against the individuals, whose bonuses may well have reflected a level of performance which is now shown to have been based on false premises? I believe Baker took a reduced pension and pay off when he left. was there a deal here? And what were the terms of Barclay's departure?

"Shareholders and other stakeholders who have suffered so grievously need answers, and need them promptly."

Whatever happened to Granite?

At the time of the Northern Rock crash, there was much interest expressed by politicians in the funny is-it-on or is-it-off balance sheet shenanigans known as Granite.

The latest statement to be laid before the House of Commons shows that granite does indeed take some wearing away. It says in part:

“The legal entity previously called Northern Rock plc, which has retained the balance (ie poorer quality – Ed) of Northern Rock’s mortgage book (including mortgages allocated to the Granite securitisation and the covered bond programme), the Government loan, its other borrowings, derivatives and certain wholesale deposits held on behalf of its Granite securitisation and covered bond programme, has been re-named Northern Rock (Asset Management)plc."

This company has been given a Treasury guarantee of £18,000 million (£18bn) for which it will "pay an appropriate fee" to ensure it doesn't get a commercial advantage.

To ensure the company will continue to operate above the minimum regulatory capital requirements, NRAM will also have a guarantee of up to £1.6 billion if required.


What seems clear is that the assets of NRAM are nothing like as bad as some would have the former shareholders believe. Granite was alleged to have creamed off lots of good mortgages when it was running full tilt. So the popular description of NRAM as the "bad bank" may just be to keep us thinking that it's worthless. Which it far from is, as the price tag when it's sold will undoubtedly show....

The Rights of Small Shareholders

By Roger Lawson, UKSA and Northern Rock Shareholders Action Group


I happened to be reading the "Rights of Man" by Thomas Paine over Christmas - have been catching up on some of my reading. For those who are not familiar with him, he was very involved in both the American and French revolutions in the late 1700s and was an influential writer on the issues then being debated.



One chapter of the book reports on the "Declaration of the Rights of Man and of Citizens" adopted by the French National Assembly just before the revolution. Clause "XVII" reads: "The right of property being inviolable and sacred, no one might be deprived of it, except in cases of evident public necessity, legally ascertained, and on condition of a previous just indemnity".



We are still looking for a "just indemnity" and it is questionable whether there was any "evident public necessity" for the nationalisation.While countries such as France established the constitutional right for citizens not to have their property confiscated many years ago, because the UK has no constitution the ruling Government party can pass a law that confiscates property without compensation, and it cannot be challenged in practice because UK judges will not overturn Acts of Parliament. Our only way of challenging it is by going to the European Courts - which will clearly take many years and much expense.

An open letter to the Prime Minister and Chancellor

Dear Gordon & Alistair

RE: COMPENSATION FOR NORTHERN ROCK NATIONALISATION

I am going to set out once again the case for giving fair compensation to Northern Rock shareholders following the farcical preliminary report by Andrew Caldwell based on ludicrous and unfair assumptions that you imposed (In administration, Not a Going Concern, No state support) which effectively ruined any chance of arriving at a FAIR & INDEPENDENT VALUATION.

I have to say that HM Government's ethics are pretty close to Karzai and Mugabe in terms of rigging the desired result. Much worse, you have exercised blatant discrimination and failed to move from Denial into Accceptance & RESPONSIBILITY. Only you Dear Gordon will be surprised why 5  million voters will chose to change from Labour to other "ethical" leadership / parties. Let me summarise the reasons for my strong views in the hope that Reason and Justice will prevail IF you abandon your EGOTISTICAL, UNETHICAL and HYPOCRITICAL position to date.

There is substantial evidence to contradict Andrew Caldwell's preliminary conclusions. A Lloyds TSB tentaive offer in excess of £3 per share was not supported by the Tripartite in August / September 2007. The private sector options --pre nationalisation-- offered shareholders an embedded value of between £2 and £4. Finally the "Market Value" of Northern Rock shares were at a very depressed level of 96 pence immediately prior to "Confiscation" of the shares in "the national interest" on 17 February 2008. Clearly any 100% bid for Northern Rock in February 2008 would have seen the shares rocket up to £5/6 for a successful bid. Therefore Andrew Caldwell's preliminary view of zero is farcical!

The Tripartite ineptitude, major errors of assessment and miserable LOLR execution turned a £5 - 8 Billion liquidity problem at NR into a major crisis and banana republic style Run on Northern Rock. A £8 Billion problem became a £25Billion requirement because of Tripartite errors of execution and dithering. This destroyed over £2 Billion of shareholder value and is WHOLLY due to Tripartite mismanagement, government dithering, and useless execution of Lender of Last Resort. The leak to the BBC was unchallened or clarified or reassurance/guarantees being given for FOUR days in the world of modern IT global markets. Quite frankly the Tripartite gave miserable leadership, failed to understand the financial Tsunami which I WARNED the BoE and Treasury about on numerous occasions. Eight months late, the huge Special Liquidity Scheme of several hundred billions was launched in April 2008. The "piecemeal " support for a private sector solution for the Rock post September 2007, with more incentives and concessions grudgingly offered by the Treasury during October 2007 to January 2008 diluted  billions more of shareholder value. The very poor management parashuted into the Rock and farcical oversight from the Tripartite was cricised by the National Audit Office.

Mistakes were compounded post nationalisation. Accelerated impairments, repossessions, deliberately sending the best customers to rival mortgage providers, panic debt collection, continuation of 100% plus loans all added to losses at Northern Rock in the interests of "politically motivated" loan repayment schedules. Then you did a 180 degree change of policy in January 2009, encouraged the Rock to lend more, no urgency in loan repayments! But your management had destroyed £4 Billion of Value! Lost the best customers, increase3d the risk proportion in the Balance Sheet of a UK bank with the lowest level of toxic debts. The SLS was followed by guarantees, Quantitative Easing, interest rate cuts to 0.5%, proactive support for the Alliance & Leicester takeover by Santander. You nationalised Bradford and Bingley and instructed a Valuation on the basis of a Going Concern! You gave £1.6 Billion support for the Dunfermline! You supported £63 Billion of SECRET loans to RBS and HBOS/Lloyds! ALL GOOD INITIATIVES but too late for Northern Rock! Over  £2 Trillion of support, subsidy, guarantees to other UK banks that enabled record profits and bonuses for 2009!

You proactively supported the Lloyds / HBOS merger despite competition hurdles! CANT YOU SEE the blatant DISCRIMINATION you have imposed on 180,000 small shareholders/savers? Cant you admit that there WAS a learning curve for the Tripartite, that policy execution was miserable in 2007, that Northern Rock shareholders at least (market valuation convention would suggest 125% of NET ASSETS equal to £5 per share) deserve the NET ASSET VALUE at 31 December 2007 of £3-80 per share? Do you think, Gordon, that people cant see the hypocricy, ego, denial and total inconsistency in your policy and assessment of the banking crisis? Leading the world is great, please ensure justice at home! Dogma and obduracy destroyed the Bank of England's credibility: do you want to go the same way?

Finally at no stage were Northern Rock shareholders consulted, allowed to vote on the options pre or post nationalisation. Confiscation "in the national interest" is justified IF you pay a FAIR price for  Northern Rock (£5 to £6 per share in my view) as if you had purchased the whole shareholding on the Open Market. The irony of "selling" the good bank which you do not have legal title to (confiscation without compensation is theft) is adding insult to injury.

Try to show decent standards of  ethics, morality, equity. Accept that Tripartite errors of assessment and execution and poor advice from Consultants and Advisors to HM Treasury  wiped out a highly profitable bank. £2 Billion in FAIR compensation is pretty trivial in relation to the Trillions of support for UK banks, billions wasted by the Departments of Health and Defense in ill conceived IT projects and procurement. Dont you want to do the right thing, end the disastrous episode in a British way? Search your conscience, consider the 180,000 poor people of the North East who have lost everything, and the 5 million who will NOT forgive or forget this disgraceful act of discrimination that defies all human rights.

Happy to meet and discuss further with you as always: do you have the guts for a face to face meeting? Should I canvass Joanna Lumley or HM The Queen?

A Happy New Year

Yours sincerely

Pradeep Chand