asked Her Majesty's Government:
Whether the debt securities in issue of £64,294.3 million contained in the last published balance sheet of Northern Rock at 31 December 2006 is secured against assets of the bank; if so, how much; and against which assets. [HL2173]
The figure quoted includes debt securities issued by Northern Rock as well as the other entities consolidated in the group accounts. Holders of debt securities issued by Northern Rock have a claim against the assets of Northern Rock as creditors of Northern Rock according to the terms of those securities. However, debt securities issued by the various securitisation vehicles set up by Northern Rock are secured against the assets of the relevant issuer, and those bondholders have no recourse to Northern Rock for repayment of their bonds.
asked Her Majesty's Government:
Whether the securitisation issues of £40.2 billion, representing 43 per cent of total funding stock, referred to by the chief executive of Northern Rock in his last report in January, are secured against assets of the bank; if so, how much; and against which assets. [HL2174]
None of these securitisation issues is secured against the assets of Northern Rock plc.
asked Her Majesty's Government:
Whether the Dolerite Funding No 1 and Dolerite Funding No 2 commercial mortgage securitisation vehicles are still in existence, as indicated on Northern Rock's website. [HL2202]
The Dolerite bonds were fully redeemed in August 2007.
asked Her Majesty's Government:
Whether they have guaranteed the Whinstone Capital Management Ltd securitisation and the Dolerite Commercial Mortgage Securitisation vehicles. [HL2203]
The securities issued by Whinstone are not covered by the guarantee arrangements.
Northern Rock has a commercial relationship with Whinstone and any funds deposited with Northern Rock by Whinstone would be covered by the guarantee arrangements in the same way as any other wholesale deposit. Northern Rock has entered into credit default swaps with Whinstone on a commercial basis and payments under these contracts would be covered by the guarantee arrangement.
The bonds issued by Dolerite were fully redeemed in August 2007.
asked Her Majesty's Government:
Whether the views of the chief executive of Northern Rock in his last report on 20 January 2007, which referred to the quality of the bank's assets remaining strong, with arrears performance on the residential lending book reflecting this and only 0.42 per cent of accounts three months or more in arrears, remain accurate. [HL2227]
The Financial Services Authority has assessed that Northern Rock has a mortgage book of good quality and remains solvent. It is a matter for its management to release specific business updates.
asked Her Majesty's Government:
Further to the statement by the Chancellor of the Exchequer on 18 February (HC Deb, col 21) that he was taking Northern Rock into a period of temporary public ownership, how many months constitutes “temporary” and whether there is any length of time beyond which temporary public ownership would not be permitted to continue. [HL2246]
The Government have set a clear strategic aim for the board of Northern Rock plc to move the bank off all forms of public sector support at the earliest appropriate opportunity, but are not setting an arbitrary deadline for returning Northern Rock to the private sector. It is for the new board to develop a strategy that best serves the objectives of Government, as sole shareholder and guarantor, in particular to protect taxpayers and depositors and promote financial stability.
asked Her Majesty's Government:
Whether Northern Rock is gaining, or will gain, any competitive advantage over other banks and building societies from its borrowings being guaranteed. [HL2247]
The Chancellor of the Exchequer and the executive chair of Northern Rock, Ron Sandler, have both made clear their commitment to ensuring that the company does not compete unfairly on the back of government support. Furthermore, any support to Northern Rock will be subject to scrutiny by the European Commission against the state aid rules, which prohibit unfair distortion of competition. The UK Government have made clear their commitment to adhering to these rules.
As further reassurance, HM Treasury has asked the Office of Fair Trading to prepare an annual report assessing the competitive impacts of Northern Rock's business on the markets in which it operates.
asked Her Majesty's Government:
Whether Northern Rock is contractually obliged to replace mortgages held by Granite as they mature or default. [HL2248]
Northern Rock is under no contractual obligation to sell further mortgages to Granite. Any decision by Northern Rock to sell mortgages to Granite would be taken for commercial reasons and in light of the strategic plan to be agreed with the Government.
asked Her Majesty's Government:
What is their estimate of the value of further mortgages which will be replaced before Northern Rock emerges from its temporary period of public ownership. [HL2250]
Northern Rock operates on an arm's-length basis from Government as a commercial entity in a competitive environment. It is inappropriate for the Government to comment on the details of Northern Rock's mortgage book.
Ron Sandler, Northern Rock's executive chair, is developing a strategic plan as a matter of priority and will present the plan to the Government shortly. The plan is subject to government approval. Any subsequent major decisions will need the approval of the Government—as in the case of any publicly owned company.
asked Her Majesty's Government:
When the Financial Services Authority will publish its report on issues relating to Northern Rock. [HL2485]
The Financial Services Authority has confirmed in its business plan 2008-09 that it will publish the conclusions of its review of lessons learnt from the Northern Rock situation in March 2008