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Northern Rock

Volume 700: debated on Thursday 24 April 2008

asked Her Majesty's Government:

Further to the announcement by HM Treasury on 18 December 2007 that the Government's Northern Rock guarantee arrangements were being extended to “all obligations of Northern Rock plc to make payments on the repurchase of mortgages under the documentation for the ‘Granite securitisation programme’”, what that contingent liability (a) amounted to at 31 December 2007 on the basis of Northern Rock's audited accounts and (b) is estimated to amount to at 31 March 2009. [HL3072]

The guarantee arrangements in respect of Northern Rock have been reported to Parliament as an unquantifiable contingent liability, for reasons of commercial confidentiality and the inherent uncertainty in forecasting future market conditions. However, it should be noted that the guarantee arrangements remain secured against the unencumbered assets of the company, and there would only be an actual liability for the Treasury in the unlikely event of a significant deterioration in the value of those assets. In that event, the liability would only be equal to the shortfall in the assets.