It’s a known fact that the sector which was the worst hit during recession was the banking sector and we have seen a lot of changes in global banking functions in this few months itself, with a lot of private banks being nationalized, and other measures being taken to ensure its stability. In one such attempt to stabilize one of the biggest banks in UK, there are plans to transform ‘Northern Rock’ into a ‘good bank’ and this will be done by injecting an amount amassing up to 10bn pounds in the state owned firm and driving off its existing mortgage book.
These steps are taken as an attempt to turn Northern Rock into a major player in the mortgage market, and also the government has tried its ways to beat of terms of an insurance scheme for the Royal Bank of Scotland that might also involve the troubled banks issuing a non – voting shares. The new set of schemes will bring about a relief to the bank as it is considered that the timetable of repayments of loans of Northern Rock will be eased or the time period lengthened, which will allow the bank to offer fresh new loans to homeowners. But the details of the scheme are yet to be agreed upon and it’s being hoped that they would agree in a time for announcement very soon.
The Newcastle based firm has already posed a warning that one in every 10 possessions will be accounted for this year and as many as one fifth of its customers are in the negative side of its equity. With this in view the bank’s troubled current mortgage book might get eased off to allow the capital being released into the bank to support new lending.
Some encouraging news came from Chancellor Alistair Darling as he has said that he wished to see Northern Rock get back in the mortgage market. But if there is any change of course it would first require the approval of EU, which has the duty to oversee the state aid given to the bank and other companies.
Thus the government is trying to find its way to re establish Northern Rock and bring it back in the mortgage market.
