Showing posts with label About NRSSG. Show all posts
Showing posts with label About NRSSG. Show all posts
Wednesday, 22 October 2008
Northern Rock Shareholders Action Group - Update No. 45
Company Recovery Ahead of Plan
Among all the welter of bad financial news recently, one announcement by Alistair Darling almost escaped the limelight. This was the information that Northern Rock had now repaid more than half of the £27bn it had borrowed from the Bank of England, and had continued to repay the loan ahead of schedule. This is despite the fact that the housing market is definitely in a much worse state than anticipated when those loans were taken out, but how much the movement of retail deposits back to Northern Rock has been encouraged by the unlimited Government guarantee is not known. However, it reinforces the views of many Northern Rock shareholders when the company was in crisis that it only needed temporary financial assistance to survive and that nationalistion was not necessary.
No Action Against the Former Directors
More details of the company's financial recovery were given in a "Quarter 3 Trading Statement" which is available on the Northern Rock web site. In there is a statement that following an investigation by the company's lawyers they had concluded that "there are insufficient grounds to proceed with any legal action for negligence against the former Directors, and [the board] has no intention of bringing such action."
Of course we did tell you some time ago that there were unlikely to be grounds for such action and that any such investigation was more "hot air" than based on any real hope of identifying grounds for such action.
Government Support for the Banking Sector
On the 8th October the Government announced wider support for the banking sector including about £500bn of total funding under the Special Liquidity Scheme and the willingness to subscribe for both preference shares and equity. UKSA issued a press release which included the following comments: "The provision of up to £200bn under the Special Liquidity Scheme is also welcomed as a short term measure to improve liquidity in the banking system. This and the other measures reinforces the point we have made before concerning Northern Rock that this company was not a special case but was simply one of the first victims of this general crisis in the banking sector. If similar measures based on a private sector solution had been applied to helping Northern Rock instead of the nationalisation that took place, the Government would not now be facing so many disgruntled shareholders and a legal action".
Note though that after the details of the Government support were announced by the companies, shareholders were astonished to discover that it seemed the Government was intent on making large profits at the expense of shareholders. Also it was "nationalisation by stealth" in the case of Royal Bank of Scotland and LloydsTSB as in both cases the Government will probably end up with effective control. Shareholders will also suffer because dividends will be non-existent for some time and profits in the companies eroded by high Government charges on the preferred shares being offered. We issued a press release which spelled out our concerns and it is present HERE.
Press Comment
An article in the Independent by Jeremy Warner on the 7th October included these comments: "Similar policy mistakes were made in Britain over the collapse of Northern Rock. Rather than support the bank with the liquidity it needed, or provide the government guarantees that would have enabled a smooth takeover, Northern Rock was demonised as a bad bank whose reckless expansion deserved to meet its nemesis in nationalisation without compensation. As events have proved, Northern Rock was, in fact, only the outrider for a funding problem that would become common to the banking system as a whole."
The media, and the general public, are now coming to realise that Northern Rock was not a bad bank but one simply suffering from the same problems that all banks have been experiencing. If the steps now being taken had been applied to Northern Rock at an early stage, then the company could have got through it's difficulties relatively easily, and the lack of confidence those difficulties instilled in the whole banking sector could have been avoided.
Reminder re Meeting for Shareholders in London
The UK Shareholders Association regularly exhibits at the World Money Show in London. This is the premier event for stock market investors in the UK. This year we are in addition holding an open meeting for Northern Rock shareholders thanks to the generous support of the organisers, and have also decided that as we have a full two hours available we will also cover Bradford & Bingley in the last hour (many of the issues are similar and some shareholders had the misfortune to hold shares in both companies). Incidentally we do now have a separate "Shareholder Action Group" for B&B shareholders so let us know if you want to go on the contact list for that also.
The World Money Show is at the Queen Elizabeth II Conference Centre on the 14-15 November 2008 and the meeting we are holding for shareholders runs from 10.00 am to 12.00 am on Saturday the 15th in the Thames Room on the 1st floor. Note that Admission to the Meeting for Shareholders and to the event in general is free but you do need to register. To register Online, visit The World Money Show London Web site today HERE.
If you cannot make the shareholder meeting, we will have a stand in the Exhibition hall and you are welcome to come and have a chat on any of the two days that the venue is open.
Campaign Status
We now have about 38,000 registered supporters for this campaign and the numbers continue to rise. It is surprising how many people who held their shares in nominee accounts have only just found out about our campaign.
Please note that with that number of supporters it can prove difficult for us to answer individual questions from supporters, so please excuse any brevity in our responses.
Fund raising is also going reasonably well although we must again ask those who have not yet contributed anything to do so. The judicial review has progressed and the case gets into court on Jan 13th 2008, but we do need to raise more funds to cover our legal expenses and other costs. Please contribute if you wish us to win this fight and get fair compensation for the confiscation of your property. Please remember that you may get several pounds per share compensation if we win this case, but little or nothing if we do not. So please donate however much you can afford. Donations can be made via credit card or debit card from this page of our web site.
Roger Lawson
Chairman, Northern Rock Shareholders Action Group
Friday, 26 September 2008
Northern Rock Shareholders Action Group - Update No. 44
Newcastle Journal's Poll Results
The Newcastle Journal recently ran a poll on what caused the problems at Northern Rock and who people think were to blame. Some of our supporters did manage to vote although our reminder to do so was too late for many. More than 70% rated the Government's handling of the situation as either poor or very poor, and almost 60% of people believe nationalizing the company to be the wrong decision. Some still blamed poor judgment by the former management as a contributory cause but on a positive note, 60% believe the brand is strong enough to survive although most thought that it would be a much smaller operation in few years time.
Banking Reform Consultation
The Because of the perceived problems in handling of the Northern Rock crisis, the Government is proposing some reforms to the banking regulation regime. It has launched a consultation on its proposals and UKSA has submitted a response which can be seen here.
Others have expressed concerns about the wide ranging powers that might be introduced to interfere with the rights of shareholders and take control of assets of banks in apparent difficulties, even in secret possibly without the knowledge of shareholders. One of the frustrating aspects of the Northern Rock affair, at least as far as the Government was concerned, was its inability to take control and override the wishes of shareholders. Our response is an attempt to widen out the debate.
Radio & TV Interviews
Our North-Eastern representative Dennis Grainger gave a good interview for the BBC which can be heard by going to this web site page.
You can also hear the excuses by Robert Peston for leaking the story of the rescue funding that precipitated the panic and run by depositors. He also makes some other comments but we do not agree with his analysis of Northern Rock at all. As the interviewer suggested, which Peston does not seem to agree with, other banks have taken advantage of the Bank of England's special liquidity scheme to help them through the credit crisis, but that was not available to Northern Rock. The beneficiaries have been kept secret however whilst Northern Rock's plight was promoted in a blaze of publicity.
Mr Peston suggests Northern Rock was a special case but the same liquidity problems hit Bradford & Bingley, and more recently, HBOS. In addition both Barclays and Royal Bank of Scotland have undertaken major rights issues to strengthen their balance sheets, while Alliance and Leicester has fallen to an opportunistic bid from Santander.
Note that the Government has encouraged and supported (via the extension of the Special Lending Scheme to the end January 2009 and dropping of competition issues) the rescue of HBOS whereas a year ago it did nothing to assist the proposed Lloyds-TSB takeover of Northern Rock - this demonstrates the Government's 'U' turn and discriminatory policy execution and supports our view that the Valuation terms are unethical given the £500 Billion of "state support" now being given without much publicity to other banks.
Valuation Process
Accountancy Age has reported some comments by Treasury staff about the valuation process. Apparently the agreed fee of £4.5 million for the valuation by BDO Stoy Hayward could be increased by "top-fee" fees - for example if there are legal disputes or for the handling of appeals. It was also made clear that Northern Rock will be charged with the cost of the process.
Liberal Democrat Comments
Nick Clegg (LibDem leader) referred to Northern Rock obliquely in his speech to the Liberal Democrat party conference. He said "When reckless bankers come with gold-plated begging bowls to ask for shareholders to be bailed out our answer should be a resounding no". Unfortunately these comments are misconceived. In the case of Northern Rock the shareholders were not looking for a free lunch - they were actually willing to support a major rights issue as part of the recovery plan, and any loans provided by the Government were done so on commercial terms - indeed on penal terms. Any Liberal Democrat supporters may care to write to Mr Clegg to correct him on this point.
Roger Lawson
Chairman, Northern Rock Shareholders Action Group
The Newcastle Journal recently ran a poll on what caused the problems at Northern Rock and who people think were to blame. Some of our supporters did manage to vote although our reminder to do so was too late for many. More than 70% rated the Government's handling of the situation as either poor or very poor, and almost 60% of people believe nationalizing the company to be the wrong decision. Some still blamed poor judgment by the former management as a contributory cause but on a positive note, 60% believe the brand is strong enough to survive although most thought that it would be a much smaller operation in few years time.
Banking Reform Consultation
The Because of the perceived problems in handling of the Northern Rock crisis, the Government is proposing some reforms to the banking regulation regime. It has launched a consultation on its proposals and UKSA has submitted a response which can be seen here.
Others have expressed concerns about the wide ranging powers that might be introduced to interfere with the rights of shareholders and take control of assets of banks in apparent difficulties, even in secret possibly without the knowledge of shareholders. One of the frustrating aspects of the Northern Rock affair, at least as far as the Government was concerned, was its inability to take control and override the wishes of shareholders. Our response is an attempt to widen out the debate.
Radio & TV Interviews
Our North-Eastern representative Dennis Grainger gave a good interview for the BBC which can be heard by going to this web site page.
You can also hear the excuses by Robert Peston for leaking the story of the rescue funding that precipitated the panic and run by depositors. He also makes some other comments but we do not agree with his analysis of Northern Rock at all. As the interviewer suggested, which Peston does not seem to agree with, other banks have taken advantage of the Bank of England's special liquidity scheme to help them through the credit crisis, but that was not available to Northern Rock. The beneficiaries have been kept secret however whilst Northern Rock's plight was promoted in a blaze of publicity.
Mr Peston suggests Northern Rock was a special case but the same liquidity problems hit Bradford & Bingley, and more recently, HBOS. In addition both Barclays and Royal Bank of Scotland have undertaken major rights issues to strengthen their balance sheets, while Alliance and Leicester has fallen to an opportunistic bid from Santander.
Note that the Government has encouraged and supported (via the extension of the Special Lending Scheme to the end January 2009 and dropping of competition issues) the rescue of HBOS whereas a year ago it did nothing to assist the proposed Lloyds-TSB takeover of Northern Rock - this demonstrates the Government's 'U' turn and discriminatory policy execution and supports our view that the Valuation terms are unethical given the £500 Billion of "state support" now being given without much publicity to other banks.
Valuation Process
Accountancy Age has reported some comments by Treasury staff about the valuation process. Apparently the agreed fee of £4.5 million for the valuation by BDO Stoy Hayward could be increased by "top-fee" fees - for example if there are legal disputes or for the handling of appeals. It was also made clear that Northern Rock will be charged with the cost of the process.
Liberal Democrat Comments
Nick Clegg (LibDem leader) referred to Northern Rock obliquely in his speech to the Liberal Democrat party conference. He said "When reckless bankers come with gold-plated begging bowls to ask for shareholders to be bailed out our answer should be a resounding no". Unfortunately these comments are misconceived. In the case of Northern Rock the shareholders were not looking for a free lunch - they were actually willing to support a major rights issue as part of the recovery plan, and any loans provided by the Government were done so on commercial terms - indeed on penal terms. Any Liberal Democrat supporters may care to write to Mr Clegg to correct him on this point.
Roger Lawson
Chairman, Northern Rock Shareholders Action Group
Friday, 12 September 2008
Northern Rock Shareholders Action Group - Update No. 43
Please Vote in the Journal's Poll Today!
The Newcastle Journal is conducting a poll on what caused the problems at Northern Rock and who people think were to blame. Please click on the link from this web page: www.nebusiness.co.uk to vote. My answers were as follows: Question 1: The Government, Question 2: Yes, Question 3: No, Question 4: Very poor, Question 5, No, Question 6: Yes, Question 7: no comment: Question 8: Yes, Question 9: still in operation on a smaller scale. The poll will close today apparently so please vote as soon as possible (the results will be available on Monday).
Valuer Appointed
The Treasury has announced the appointment of Andrew Caldwell, a partner in BDO Stoy Hayward, as the valuer for your shares in Northern Rock. However, if you are expecting "fair compensation" as promised by the Chancellor when announcing the nationalisation of the company, think again. The terms of reference of the valuation which are set in the Nationalisation Act and associated Compensation Order will almost certainly mean little or no value is attributed to your shares.
The only way you are going to get fair compensation is if the legal action that is being pursued by private shareholders, and by the two largest institutional shareholders, is successful.
No doubt the valuer will need to go through the normal processes though which could take some months, and he will collect a fee of £4.5 million for his work. Members of your committee did a number of TV interviews on the subject of the appointment of the valuer and the status of Northern Rock one year after the "run on the bank". We were also quoted at length in several national and local newspapers.
Status of Legal Action
For those who have only recently joined this campaign (and we have had a lot of new supporters of late), the position is that the three groups mentioned above have all filed for a judicial review of the terms of the nationalization which should get into court on January 13th next year. We are asking for the Act and the Compensation Order to be set aside on the basis that it breaches the European Convention on Human Rights. In essence our claim is that the compensation terms have been set totally artificially by the Government to ensure that no or very little compensation is paid.
Alistair Darling's Background
One of the most outrageous aspects of the Northern Rock affair has been the consistent failure to recognize shareholders as having an interest in the company and to accept that they were "stakeholders" alongside depositors, lenders to the company (such as the Government) and employees. Statements issued by the Treasury made it clear that shareholders interests were to be ignored, and comments in Parliament by MPs portrayed shareholders as simple speculators who deserved to lose everything.
An interesting slant on why Mr Darling might not be sympathetic to shareholders rights was given recently in Private Eye. It commented on an interview he gave to the Guardian on his early life and suggested that it was somewhat distorted. Old Edinburgh comrades were reported as remembering Darling as a keen supporter of the International Marxist Group, British section of the Trotskyist Fourth International. It also claims he was a typical local-government leftie on Lothian regional council, and even denounced George Galloway as a "reformist" after the latter pointed out that Darling's opposition to the rate-capping laws would be disastrous and might land him in jail.
Fannie & Freddie
It is worth noting that the US rescues of Fannie Mae and Freddie Mac that were announced recently were conducted in a far more shareholder-friendly manner than the Northern Rock nationalisation.
One of our committee members identified the following differences between these two takeovers:
US treatment of Fannie/Freddie versus UK treatment of Northern Rock
1. US - Conservatorship (i.e., shareholders retain rights to residual profits as per normal, however, management control temporarily passed to the government authorities) UK - Nationalisation with strenuous attempts made to pay shareholders close to nothing in compensation with complete deprivation of shareholders' basic rights to corporate profits made in the interim.
2. US - Dividends forcibly suspended in order to conserve capital as part of conservatorship plan. UK - Confiscation of shares after dividends were voluntarily suspended.
3. US - Intended 10% p.a., wind-down in Mortgage backed security book through natural attrition with the aim of emerging as a more robust business in several years' time. UK - Intended complete payback of government lending within three years to the exclusion of all else. Competitors permitted to "cherry-pick" best quality assets at low prices in order to achieve this goal more quickly at the expense of long-term stability.
4. US - Co-operation and co-ordination between Federal Treasury and FHFA. UK - Very little co-ordination between the Tripartite authorities.
5. US - Government support payments recognised as "senior preferred stock" with warrants issued to provide taxpayer protection. Government authorities recognise that this entails that the returns to the taxpayer will be strongly linked to the health of the business. UK - Government payments recognised as debt facilities. Government authorities fail to recognise this fact and are presently attempting to gain both equity-holders' upside gains and debt-holders downside protection simultaneously.
6. US - Outgoing management recognised as being in no way responsible for the credit conditions that have precipitated these problems. UK - Outgoing management used as scapegoats.
It's A Wonderful Life
It's a Wonderful Life - that may not be the view of many Northern Rock shareholders recently, but it is the title of a well known film (Star: James Stewart, Director Frank Capra). It's worth mentioning because at a seminar this week on Northern Rock, hosted by Andrew Neil, the panel were asked "would they have saved Bailey's Savings & Loan" and most of them seemed stumped by the question.
The film is the story of a bank that experiences a run of depositors after some dodgy accounting. The bank is about to crash into insolvency, Stewart is in despair and gives up hope. But an angel shows him what life would be like in the town without the mortgage and other lending by the bank - homeless and jobless people in essence. So he is encouraged to save it with a happy ending resulting. Certainly a film worth seeing by every banking regulator and those who think that solvent banks should be left to go bust due to temporary cash flow difficulties. It's readily available on DVD.
Other Points to Note
Several shareholders have contacted me concerning telephone calls from an organization named AMG. They seem to be contacting shareholders simply because your name is on the share register of the company (anyone can obtain a copy of this, as we did, and please note that we have not passed your personal details onto anyone). We are not aware of any official role granted to this company and calling anyone out of the blue for the purposes of promoting financial services to someone is not permitted in the UK. Such calls by anyone should be treated with deep suspicion.
Several people have pointed out that there are possible solutions to the problem reported in our last newsletter of an inheritance tax liability on Northern Rock shares arising on the former death of a shareholder. You should consult a lawyer or tax accountant for further advice if you have experienced this problem.
Roger Lawson
Chairman, Northern Rock Shareholders Action Group
The Newcastle Journal is conducting a poll on what caused the problems at Northern Rock and who people think were to blame. Please click on the link from this web page: www.nebusiness.co.uk to vote. My answers were as follows: Question 1: The Government, Question 2: Yes, Question 3: No, Question 4: Very poor, Question 5, No, Question 6: Yes, Question 7: no comment: Question 8: Yes, Question 9: still in operation on a smaller scale. The poll will close today apparently so please vote as soon as possible (the results will be available on Monday).
Valuer Appointed
The Treasury has announced the appointment of Andrew Caldwell, a partner in BDO Stoy Hayward, as the valuer for your shares in Northern Rock. However, if you are expecting "fair compensation" as promised by the Chancellor when announcing the nationalisation of the company, think again. The terms of reference of the valuation which are set in the Nationalisation Act and associated Compensation Order will almost certainly mean little or no value is attributed to your shares.
The only way you are going to get fair compensation is if the legal action that is being pursued by private shareholders, and by the two largest institutional shareholders, is successful.
No doubt the valuer will need to go through the normal processes though which could take some months, and he will collect a fee of £4.5 million for his work. Members of your committee did a number of TV interviews on the subject of the appointment of the valuer and the status of Northern Rock one year after the "run on the bank". We were also quoted at length in several national and local newspapers.
Status of Legal Action
For those who have only recently joined this campaign (and we have had a lot of new supporters of late), the position is that the three groups mentioned above have all filed for a judicial review of the terms of the nationalization which should get into court on January 13th next year. We are asking for the Act and the Compensation Order to be set aside on the basis that it breaches the European Convention on Human Rights. In essence our claim is that the compensation terms have been set totally artificially by the Government to ensure that no or very little compensation is paid.
Alistair Darling's Background
One of the most outrageous aspects of the Northern Rock affair has been the consistent failure to recognize shareholders as having an interest in the company and to accept that they were "stakeholders" alongside depositors, lenders to the company (such as the Government) and employees. Statements issued by the Treasury made it clear that shareholders interests were to be ignored, and comments in Parliament by MPs portrayed shareholders as simple speculators who deserved to lose everything.
An interesting slant on why Mr Darling might not be sympathetic to shareholders rights was given recently in Private Eye. It commented on an interview he gave to the Guardian on his early life and suggested that it was somewhat distorted. Old Edinburgh comrades were reported as remembering Darling as a keen supporter of the International Marxist Group, British section of the Trotskyist Fourth International. It also claims he was a typical local-government leftie on Lothian regional council, and even denounced George Galloway as a "reformist" after the latter pointed out that Darling's opposition to the rate-capping laws would be disastrous and might land him in jail.
Fannie & Freddie
It is worth noting that the US rescues of Fannie Mae and Freddie Mac that were announced recently were conducted in a far more shareholder-friendly manner than the Northern Rock nationalisation.
One of our committee members identified the following differences between these two takeovers:
US treatment of Fannie/Freddie versus UK treatment of Northern Rock
1. US - Conservatorship (i.e., shareholders retain rights to residual profits as per normal, however, management control temporarily passed to the government authorities) UK - Nationalisation with strenuous attempts made to pay shareholders close to nothing in compensation with complete deprivation of shareholders' basic rights to corporate profits made in the interim.
2. US - Dividends forcibly suspended in order to conserve capital as part of conservatorship plan. UK - Confiscation of shares after dividends were voluntarily suspended.
3. US - Intended 10% p.a., wind-down in Mortgage backed security book through natural attrition with the aim of emerging as a more robust business in several years' time. UK - Intended complete payback of government lending within three years to the exclusion of all else. Competitors permitted to "cherry-pick" best quality assets at low prices in order to achieve this goal more quickly at the expense of long-term stability.
4. US - Co-operation and co-ordination between Federal Treasury and FHFA. UK - Very little co-ordination between the Tripartite authorities.
5. US - Government support payments recognised as "senior preferred stock" with warrants issued to provide taxpayer protection. Government authorities recognise that this entails that the returns to the taxpayer will be strongly linked to the health of the business. UK - Government payments recognised as debt facilities. Government authorities fail to recognise this fact and are presently attempting to gain both equity-holders' upside gains and debt-holders downside protection simultaneously.
6. US - Outgoing management recognised as being in no way responsible for the credit conditions that have precipitated these problems. UK - Outgoing management used as scapegoats.
It's A Wonderful Life
It's a Wonderful Life - that may not be the view of many Northern Rock shareholders recently, but it is the title of a well known film (Star: James Stewart, Director Frank Capra). It's worth mentioning because at a seminar this week on Northern Rock, hosted by Andrew Neil, the panel were asked "would they have saved Bailey's Savings & Loan" and most of them seemed stumped by the question.
The film is the story of a bank that experiences a run of depositors after some dodgy accounting. The bank is about to crash into insolvency, Stewart is in despair and gives up hope. But an angel shows him what life would be like in the town without the mortgage and other lending by the bank - homeless and jobless people in essence. So he is encouraged to save it with a happy ending resulting. Certainly a film worth seeing by every banking regulator and those who think that solvent banks should be left to go bust due to temporary cash flow difficulties. It's readily available on DVD.
Other Points to Note
Several shareholders have contacted me concerning telephone calls from an organization named AMG. They seem to be contacting shareholders simply because your name is on the share register of the company (anyone can obtain a copy of this, as we did, and please note that we have not passed your personal details onto anyone). We are not aware of any official role granted to this company and calling anyone out of the blue for the purposes of promoting financial services to someone is not permitted in the UK. Such calls by anyone should be treated with deep suspicion.
Several people have pointed out that there are possible solutions to the problem reported in our last newsletter of an inheritance tax liability on Northern Rock shares arising on the former death of a shareholder. You should consult a lawyer or tax accountant for further advice if you have experienced this problem.
Roger Lawson
Chairman, Northern Rock Shareholders Action Group
Thursday, 14 August 2008
Freedom of Information?
The Treasury, it seems, is still intent on playing their cards close to their chest about what Ministers are being told to do about Northern Rock. Witness the following letter, a response to an FOI request put in back in July which has had a response yesterday (the footnotes were on the letter from the Treasury, with the formatting edited to make them easier to read here):
Freedom of Information Act 2000: Northern Rock
Thank you for your two enquiries dated 10 July, which we received on 16 July, requesting information under the Freedom of Information Act 2000 (‘the Act’).
2. You asked for information covering –
- the final advice to Ministers on the potential job losses at Northern Rock following its restructuring, and any prospects to ameliorate the effect of job losses on the north east economy.
- the final advice to Ministers on the timing and potential valuation of Northern Rock’s return to the private sector following restructuring and the repayment of Government/Bank of England support.
3. Regarding your second request, the timing and potential valuation of Northern Rock’s return to the private sector following restructuring and the repayment of Government/Bank of England support is something that would need to be addressed in the circumstances of the time at which a return to the private sector was considered and no final advice has been given. Therefore we do not hold information regarding this request.
4. The Treasury does hold information falling within the scope of your first request. Regarding this request, in the period of temporary public ownership the company is being run at arms length from Government and on a commercial basis. The day-to-day relationship between the Treasury, as the shareholder, and the company is set out the Northern Rock Shareholder Relationship Framework document [see note 1]. This states that Government as shareholder:
“determines the high level objectives that the [business] Plan is designed to achieve and agrees the [business] Plan with the Board”
5. Ministers have been provided with advice on and approved the Northern Rock Board’s plan. An executive summary of the Provisional Northern Rock Restructuring Plan was published on 31 March 2008 [see note 2]. The plan sets out the basis for the removal of financial support provided by HM Treasury and the Bank of England through the creation of a smaller, more focused and financially viable mortgage and savings bank that will be returned in due course to the private sector. The plan addressed the specific question you raise regarding potential job losses. It envisaged:
“about a one-third reduction in staff levels over the next three years based on projected business volumes with the majority of the reduction occurring in the first year. The timing and nature of the proposed downsizing, including any redundancy arrangements, will be subject to consultation with representatives of Unite and other employee representatives;”
and stated:
“Northern Rock is committed to open communication with staff and to providing them with substantial support during the restructuring. The Bank will continue to work closely with Unite, One NorthEast and other agencies and stakeholders to minimise the impact of the proposed downsizing on staff and local communities; this includes providing outplacement services to help staff obtain alternative employment in the region”.
6. The Treasury judges that the remaining information it holds that falls within your request falls under the exemption in Section 35 (1)(a) of the Act, which covers information related to the formulation and development of government policy. This is a qualified exemption and requires us to consider the balance of public interest for and against release of the information.
7. We recognise that there is a broad public interest in knowing the advice given to Ministers in relation to Northern Rock whilst it is in temporary public ownership. However there is also a strong public interest in effective policy-making. In order to develop government policy it is necessary that officials have the space to freely give full and frank advice to Ministers on Northern Rock’s plans and performance during its period of temporary public ownership. Our judgement is that it is not in the public interest to release the information we hold at this time.
8. If you have any queries about this letter, please contact me. It will be helpful to us if you remember to quote the reference number above in any future communications.
Ashley Britten
Information Rights Unit
1 Some details on a Treasury website
2 Some details on the Northern Rock Website
Freedom of Information Act 2000: Northern Rock
Thank you for your two enquiries dated 10 July, which we received on 16 July, requesting information under the Freedom of Information Act 2000 (‘the Act’).
2. You asked for information covering –
- the final advice to Ministers on the potential job losses at Northern Rock following its restructuring, and any prospects to ameliorate the effect of job losses on the north east economy.
- the final advice to Ministers on the timing and potential valuation of Northern Rock’s return to the private sector following restructuring and the repayment of Government/Bank of England support.
3. Regarding your second request, the timing and potential valuation of Northern Rock’s return to the private sector following restructuring and the repayment of Government/Bank of England support is something that would need to be addressed in the circumstances of the time at which a return to the private sector was considered and no final advice has been given. Therefore we do not hold information regarding this request.
4. The Treasury does hold information falling within the scope of your first request. Regarding this request, in the period of temporary public ownership the company is being run at arms length from Government and on a commercial basis. The day-to-day relationship between the Treasury, as the shareholder, and the company is set out the Northern Rock Shareholder Relationship Framework document [see note 1]. This states that Government as shareholder:
“determines the high level objectives that the [business] Plan is designed to achieve and agrees the [business] Plan with the Board”
5. Ministers have been provided with advice on and approved the Northern Rock Board’s plan. An executive summary of the Provisional Northern Rock Restructuring Plan was published on 31 March 2008 [see note 2]. The plan sets out the basis for the removal of financial support provided by HM Treasury and the Bank of England through the creation of a smaller, more focused and financially viable mortgage and savings bank that will be returned in due course to the private sector. The plan addressed the specific question you raise regarding potential job losses. It envisaged:
“about a one-third reduction in staff levels over the next three years based on projected business volumes with the majority of the reduction occurring in the first year. The timing and nature of the proposed downsizing, including any redundancy arrangements, will be subject to consultation with representatives of Unite and other employee representatives;”
and stated:
“Northern Rock is committed to open communication with staff and to providing them with substantial support during the restructuring. The Bank will continue to work closely with Unite, One NorthEast and other agencies and stakeholders to minimise the impact of the proposed downsizing on staff and local communities; this includes providing outplacement services to help staff obtain alternative employment in the region”.
6. The Treasury judges that the remaining information it holds that falls within your request falls under the exemption in Section 35 (1)(a) of the Act, which covers information related to the formulation and development of government policy. This is a qualified exemption and requires us to consider the balance of public interest for and against release of the information.
7. We recognise that there is a broad public interest in knowing the advice given to Ministers in relation to Northern Rock whilst it is in temporary public ownership. However there is also a strong public interest in effective policy-making. In order to develop government policy it is necessary that officials have the space to freely give full and frank advice to Ministers on Northern Rock’s plans and performance during its period of temporary public ownership. Our judgement is that it is not in the public interest to release the information we hold at this time.
8. If you have any queries about this letter, please contact me. It will be helpful to us if you remember to quote the reference number above in any future communications.
Ashley Britten
Information Rights Unit
1 Some details on a Treasury website
2 Some details on the Northern Rock Website
Tuesday, 29 July 2008
Northern Rock Shareholders Action Group – Update No. 40
Meetings Report – Jon Wood Accuses the Government of “Theft”
We held meetings for our supporters in Newcastle and London recently. About 200 people attended the meeting in Newcastle and 100 in London which may be disappointing to some but not unexpected bearing in mind the average age of Northern Rock shareholders and their reluctance to travel far, the holiday season, and other factors. Also we were not announcing anything particularly new at these meetings, so they were primarily an opportunity for shareholders to ask questions and hear what we had been doing and why. This was particularly helpful to those who do not get our regular email updates.
Incidentally we received a number of requests for meetings in other parts of the country (eg. Scotland, the West of England, etc). It is beyond our limited resources in time and money to organise local meetings everywhere, but if any enthusiastic supporters wish to arrange such meetings then we would be supportive and would try to provide a speaker.
Jon Wood of SRM Global spoke succinctly at the Newcastle meeting and repeated what he had said to the local press – namely that MPs were guilty of backing the “theft” of the company from shareholders. In his view they had ruined the lives of thousands of honest innocent people as a result. He made these comments after meeting a number of particularly disadvantaged shareholders earlier in the day, whose plight had clearly moved him.
In response, Nick Brown M.P. Minister for the North East said that such remarks were “unacceptable”. He also said “the bank was brought to the brink of ruin by greed and the use of unacceptable risk taking”. But this is not the view of our supporters based on a survey taken of shareholders who clearly now blame the Government primarily for the sequence of events.
Subsequently Jon Wood said to the Sunday Telegraph “Does Nick Brown realise that Northern Rock did not break any rules so that all the risk taking at the bank was approved by his boss Gordon Brown, the tripartite and the Basel II regulations? The bank was suffering from a liquidity crisis, it was not losing money. It’s the same problem that all the banks have run into. And if that was unacceptable risk-taking then why has the Government allowed them to tap into the special loan facility to the tune of £100bn?” He added “How much longer do we have to keep being told how the mess created by Gordon Brown is everybody else’s fault?”
Other speakers at the meeting were Chris Hulme, who gave the views of a mortgage broker, Dennis Grainger, a former Northern Rock employee who organised the meeting, Doreen & Dennis Shannon, Alan Appleby, Brian Peart, Steve Wilkinson and other former shareholders.
Roger Lawson, Chairman of the Action Group, spoke and he backed up what Jon Wood had to say regarding the causes of the crisis at Northern Rock, and the ethics of what the Government had done. The content of his presentation can be seen at: www.uksa.org.uk/UKSA_Northern_Rock_2.pdf .
One question that came up at the meeting was about the Government’s claim that shareholders should not be compensated, because without Government support the company would have had to cease trading. This was countered by the following arguments:
1. The Government lent money to the company on a commercial basis and was also paid for the guarantees provided by the Government to depositors. The company always adhered to the terms of the Government loans and as far as we know paid interest when it became due – indeed they had commenced repaying the loans before nationalization took place. These loans were not exceptional, they were provided under “Lender of Last Resort” facilities from the Bank of England which Northern Rock qualified for as would any other solvent bank.
2. The Government was a minority lender to the company in terms of its total liabilities. An analogy to the Government’s claim to be able to acquire the company for nothing is where someone who granted you a mortgage on 25% of the value of your house, suddenly decided, when you had not defaulted in any regard, that this gave them the right to acquire the property and pay you nothing. That is what shareholders are being asked to accept.
In London, the main speaker was Roger Lawson, and similar questions on the whole arose from the audience. One issue that came up though was whether shareholders would like to have the company returned to them after the “period of temporary public ownership”. On a show of hands, the general view appeared to be “yes”, but it was pointed out that shareholders may not want it back because of the damage now being caused to the company by the management now in place. The size and value of the business was going to be much reduced as a result from what it might have been, or what it was at the date of nationalization.
Some photographs taken at the two meetings have been added to this page of our web site: www.uksa.org.uk/NorthernRockPhotos.htm . Our thanks go to Newcastle City Council for providing the venue in Newcastle free of charge.
The Role of Lender of Last Resort
An interesting light on the role of the Bank of England in the crisis of Northern Rock was given by a lengthy article in “FT Weekend” on the 19th July. This was a report on a lecture by Richard Lambert, Director General of the CBI, at Templeton College, Oxford. It included this comment:
“The role of lender of last resort was classically defined by Walter Bagehot. His great book Lombard Street was published in 1873, and set out what has become the guiding mantra for central banks in times of crisis ever since: lend freely at high rates against good collateral. Lend freely, in his words ‘to stay the panic’. At high rates, so that 'no one may borrow out of idle precaution without paying well for it'. And lend on all good banking securities to an unlimited extent – because the ‘way to cause alarm is to refuse someone who has good security to offer’”.
Of course the Bank of England did exactly what is countenanced against in the last sentence when first faced with a request for support from Northern Rock. One wonders if Mervyn King, the Governor, had ever read this tome.
Tax Position
Shareholders have been wondering as to whether the nationalization of Northern Rock qualifies as a disposal of the shares and if so, at what value. HM Revenue and Customs have recently published a note that spells out the position – see the following web page: www.hmrc.gov.uk/briefs/vat/brief3208.htm .
In essence they have accepted that the shares will be of nil value at the date of nationalization, which rather supports our argument that this is the only answer any independent valuer can come up with if they follow the Governments terms of reference in the Act and the Compensation Order. So shareholders can recognize a full loss on the shares for capital gains tax purposes. Those shareholders who obtained the shares for nothing in the original demutualization will likewise have no profit to declare.
New CEO at Northern Rock
Northern Rock have announced the appointment of a new Chief Executive. His name is Gary Hoffman who comes from Barclays. Andy Kuipers, the last of the original board still present, will be leaving and Ron Sandler will change his role to that of “non-executive” Chairman.
Why Has the Government Not Informed Shareholders of Nationalisation?
Many shareholders have asked if they have missed out on any communications from the company or the Government about the confiscation of their shares, and what is happening re the independent valuation process. No you have not. Surprisingly nobody, other than UKSA, has told shareholders, even those on the share register, that their shares have been confiscated. Although this is something the independent valuer is lined up to do, it is clearly going to be many months before anything is sent to shareholders. Why the lack of communication? Is the Government simply unwilling to publicise what it has done?
The Source of the Leak that Caused the Run on the Bank
Mervyn King, Governor of the Bank of England, was tackled by Jim Cousins M.P. at the 22nd July meeting of the Treasury Select Committee on the subject of the source of the leak of funding to Northern Rock that was dramatically promoted by the BBC and instigated the run on the bank. Cousins suggested that an inquiry into the leak would be a good idea. Mr King responded that he did not think any leak inquiry has ever produced a very productive results, and “I think it is pretty clear where leaks tend to come from”. He went on to give an assurance that no leak came from the Bank of England, and that he could not carry out an investigation into a leak from any other authorities. The conclusion one might draw from this banter is that the leak came from the Treasury or associated politicians. We suggest that an inquiry into this critical matter would be a good thing to have however.
The Parallels in the Equitable Life Case
Equitable Life has been in the news recently following the publication of a damning report by the Parliamentary Ombudsman into the crisis at the company some years ago. The business almost collapsed and over a million policyholders lost a substantial proportion of their investment. The Ombudsman, Ann Abraham, attributes much of the blame to faulty regulation of the business by the Government authorities and recommends that the Government establishes a fund to compensate those affected.
The Government has persistently avoided any public inquiry into this affair, and has been trying to pin the blame solely on the former directors. The parallels with Northern Rock are very clear as the FSA has already admitted gross defects in their regulation of the latter company. Any agreement to compensate Equitable Life policyholders would surely set yet another precedent that would point out the moral iniquity of the Government depriving Northern Rock shareholders of their interest in the company without fair compensation.
Roger Lawson
Communications Director, UK Shareholders Association; and
Chairman, Northern Rock Shareholders Action Group
Thursday, 26 June 2008
Northern Rock Shareholders Action Group – Update No. 38 and Notice of Meetings for Shareholders
Meetings for Shareholders
We have arranged two meetings for Northern Rock shareholders:
On Thursday the 17th July commencing at 6.30 p.m. at the Banqueting Suite, Newcastle Civic Centre, Barras Bridge, NE99 1RD - next to the Haymarket Metro and Bus Stations. Note that parking is available in the council’s car park in
On Saturday the 26th July at 10.30 am at St.Columba’s Church,
All shareholders are welcome, but if you plan to attend either venue then please let us know by sending an email to uksa@uksa.org.uk so we can get some idea of likely numbers of attendees (make sure you advise which venue/date).
These meetings will contain a briefing and explanation on what we have been doing on your behalf and the status on the legal action. They will also enable you to ask questions of course. We hope to have a representative of one of the large institutional shareholders in Northern Rock speaking at the
These are the first meetings we have held for shareholders since last November so please come along if you can – there is no charge of course. Press and other media are also welcome. Incidentally if you can’t make these dates, we are planning a further meeting in
Northern Rock Looks into the Conduct of Former Directors
Several newspapers reported that Ron Sandler, the new executive Chairman of Northern Rock, had asked lawyers to look into the conduct of the previous board to see if action should be taken against the former executives. Our view is that this is simply “hot air” as there is no obvious ground for legal action under English law. Certainly on the evidence publicly available, and we have examined this of course, there are no apparent grounds for alleging breach of duty by former directors.
However much shareholders and the public might wish to raise the alleged failings of the former board, English law makes such cases very difficult to pursue so long as the directors acted in good faith and to the best of their abilities. Unless clear examples of fraud or malicious intent can be discovered, they are unlikely to succeed.
This seems more likely to be an attempt to divert attention away from the failings of the Government in handling the Northern Rock crisis, and the moral disgrace of the nationalisation without fair compensation, than a realistic attempt to achieve anything. As we have said before, the over-emphasis on the possible mistakes of the former board detracts from an examination of the main causes of the downfall of Northern Rock.
Tuesday, 22 January 2008
Welcome to the Northern Rock Small Shareholders' Group Blog
Welcome to the new NRSSG blog. We hope to use this to communicate with our members but also to post up occassional news stories and also to give you the opportunity to comment on the latest developments.
Please let us know by adding comments to this post if you have any feedback or suggestions.
Our aims:
1. Our preference is for Northern Rock to remain an independent, publicly quoted business headquartered in the North East, supporting the Northern Rock Charitable Foundation.
2. We are opposed to a 'fire sale' of the company's assets at below true value, and the dismemberment of the business.
3. If the company is acquired, our preference will be for a buyer of the shares who gives us the option of remaining shareholders going forward.
4. We will resist pressure by authorities to compel Northern Rock to actions which are not in the best interest of the small shareholders.
Any small shareholder is welcome to join the group by emailing or writing with the name and contact details of each shareholder (if shares held jointly). There is no membership charge.
Please let us know by adding comments to this post if you have any feedback or suggestions.
Our aims:
1. Our preference is for Northern Rock to remain an independent, publicly quoted business headquartered in the North East, supporting the Northern Rock Charitable Foundation.
2. We are opposed to a 'fire sale' of the company's assets at below true value, and the dismemberment of the business.
3. If the company is acquired, our preference will be for a buyer of the shares who gives us the option of remaining shareholders going forward.
4. We will resist pressure by authorities to compel Northern Rock to actions which are not in the best interest of the small shareholders.
Any small shareholder is welcome to join the group by emailing or writing with the name and contact details of each shareholder (if shares held jointly). There is no membership charge.
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