My right honourable friend the Chancellor of the Exchequer (Alistair Darling) has made the following Written Ministerial Statement.

I am pleased to inform the House that the planned legal and capital restructuring of Northern Rock as announced in my Written Ministerial Statement of 8 December 2009 successfully took effect on 1 January 2010. As a result, two new companies are now carrying out the business formerly carried out by Northern Rock—Northern Rock plc, a new savings and mortgage bank, and Northern Rock (Asset Management) plc, the existing company (renamed) that holds and services the majority of the existing residential mortgage book.

The Government’s actions to stabilise Northern Rock over the past two years have protected the savings and deposits of hundreds of thousands of British families. From 1 January 2010, a healthy new Northern Rock will offer savings and mortgage products, increasing competition in the sector and providing consumers with more choice.

In my Statement of 8 December, I also promised to provide the House with details of the financial support provided by the Government to support the restructuring of the company.

On 31 December 2009, the Government provided Northern Rock plc with £1.4 billion of capital support in order for the company to meet the Financial Services Authority (FSA) regulatory capital requirements. The Government have also provided a commitment to the FSA that up to £1.6 billion in additional capital support will be provided to Northern Rock (Asset Management) plc should the need arise in order for Northern Rock (Asset Management) plc to continue to meet its regulatory capital requirements. These amounts are within the £3 billion of capital support announced by the Government in August 2008.

The outstanding government loan owed by Northern Rock (Asset Management) plc has been reduced by £12.6 billion from £26.9 billion as at 31 December 2007 to £14.3 at 31 December 2009. The loan increased on 4 January 2010 by £8.5 billion, taking the outstanding loan balance to £22.8 billion, in order for Northern Rock (Asset Management) plc to finance the difference in mortgage assets and retail and wholesale deposit liabilities that were transferred to Northern Rock plc. As previously announced, Northern Rock plc will use the cash that it has received from Northern Rock (Asset Management) plc to increase mortgage lending.

The Government are also providing a working capital loan facility to Northern Rock (Asset Management) plc currently up to £2.5 billion to help with the orderly wind-down of the company. This liquidity facility is similar to the working capital loan facility that the Government have provided to Bradford & Bingley plc. The Government expect the loan facilities to Northern Rock (Asset Management) plc to be repaid in full.

The restructuring of Northern Rock has been assessed as the best means of achieving the Government’s stated objectives to support financial stability, protect depositors’ money and deliver value for money to taxpayers. The restructuring is also part of the Government’s policy to encourage and support a well functioning mortgage market, where lenders lend responsibly and borrowers have access to a wide range of mortgages that they can afford to repay. At some point in the future, the Government will sell its stake in Northern Rock plc. In any sale, the objectives of the Government will be to promote competition for retail services, secure the best possible return to taxpayers and ensure that Northern Rock plc will continue to increase its lending to home owners.