"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