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Northern Rock to revive mortgage lending
23 Feb 2009An additional £14 billion in mortgage lending by nationalised Northern Rock will be announced today as part of a new wave of government measures to tackle the economic crisis.
The lender will make an extra £5 billion in loans this year with a further £9 billion in 2010.
The move follows Chancellor Alistair Darling's decision last month to reverse the rapid wind down of the bank's loan book.
Ministers are increasingly anxious to see the flow of credit restored to home-buyers and businesses amid continuing reluctance by the banks to lend as they rebuild their balance sheets.
Northern Rock is well ahead of schedule on its repayment of the money it borrowed from the Government, with £9 billion outstanding at the end of December compared to £27 billion a year earlier.
Today's announcement is expected to be the first in a series relating to the embattled banking sector over the course of the week.
Prime Minister Gordon Brown and Mr Darling returned last night from a summit of European leaders in Berlin to be briefed on talks which took place over the weekend between the Treasury and UK banks on the Government's asset-protection scheme.
The plan, which is expected to be finalised this week, will see the taxpayer underwrite the so-called "toxic" assets held by the banks in an effort to get the flow of credit going again.
Ministers are also expected to move towards a policy of "quantitative easing" - or printing money - providing tens of billions of pounds to buy bonds and gilts from banks.
On Thursday, the 68% state-owned Royal Bank of Scotland will unveil a dramatic restructuring in which assets worth several hundred billion pounds will be put up for sale.
Stephen Hester, RBS's new chief executive, will trigger the dismantling of the empire assembled by his predecessor Sir Fred Goodwin by creating a non-core subsidiary into which about £300 billion of unwanted assets will be placed.
The aim is to isolate the troubled areas of the business into a "bad bank" and allow the stock market to place a value on the remaining core operations.
With the bank expected to announce losses of up to £28 billion it was reported that as many as 20,000 jobs could go, equivalent to around 10% of the global workforce and in addition to thousands of posts which have already been axed.
At yesterday's meeting in Berlin, the eight European leaders involved agreed a series of proposals to overhaul the global financial system, bringing hedge funds and other elements of the "shadow banking system" under international supervision.
Mr Brown told the closing news conference: "We are are looking at how, working with all continents, we can ensure the best means by which the banking system can serve the public - stewards of people's money rather than speculators with people's money."
The talks, hosted by German Chancellor Angela Merkel, were designed to firm up a common European position ahead of the G20 summit of advanced and developing nations in London in April.
