UK crisis bank Northern Rock to be nationalized

LONDON, England (CNN) — Troubled British bank Northern Rock, which has been hit hard by the credit crunch, is to be nationalized UK finance minister Alistair Darling confirmed Sunday.

Darling, speaking at a hastily convened press conference in London Sunday afternoon, said he would introduce legislation to implement the temporary public ownership in UK parliament Monday. Shares in the bank are to be suspended before markets open Monday morning.

Northern Rock — Britain’s fifth-largest mortgage lender — got into difficulties last September after becoming especially vulnerable to the fallout from the U.S. sub-prime mortgage crisis.

It received an emergency loan from the Bank of England, leading worried Northern Rock customers to withdraw more than $4 billion in Britain’s first bank run in more than a century.

So far Northern Rock has received loans and guarantees totaling more than 55 billion ($108 billion) from the UK government.

Darling said that two private sector bids — an in-house management team and a consortium led by Richard Branson’s Virgin Group — did not deliver value for money for the taxpayer.

The decision means that the bank will now be taken into public ownership — but Darling said that the bank would be managed at arm’s length and still operate as a normal commercial business.

He added that Goldman Sachs had recommended that in the circumstances a temporary period of public ownership was the best option. He also said that UK financial watchdog the Financial Services Authority had said that the business was solvent and that its mortgage book was of good quality. E-mail to a friend

UK crisis bank Northern Rock to be nationalized – found here.