Chapter 564 Return Within a Certain Period of Time

Regarding the institutions and consortiums that intend to acquire Northern Rock Bank, the government has made it clear that in the offer for acquisition, they need to reflect their specific plans and timetables for assuming and repaying the loans of the British government, and choose the most satisfactory plan from them.

It is estimated that the current market value of Northern Rock Bank has shrunk from more than 5.2 billion pounds in February this year to less than 360 million pounds now.

In the final analysis, Northern Rock Bank's investment in subprime mortgage bonds (CDO) is not high, only about 250 million pounds.

Therefore, their losses in the subprime mortgage crisis were not that great. The reason why it triggered a run was that only about 25% of the loans issued by Northern Rock Bank came from their depositors, and up to 75% of the funds were obtained through financial markets and interbank lending.

As mentioned before, the higher the proportion of funds from depositors in the bank's loans, the lower the risk of the bank. Therefore, when the bank develops to a certain extent, some people withdraw money while others exist. The savings deposited in the bank are basically stable, and the probability of a run is extremely small. The run on the Northern Rock Bank is the first bank run in Britain in more than 150 years.

Funds from the financial market and borrowing are different. Generally speaking, it is equivalent to Northern Rock Bank borrowing funds from the financial market with its own reputation, and then lending these funds to others, and they get the interest difference.

However, although this method can enable Northern Rock Bank to achieve rapid development during economic prosperity, it is very sensitive to changes in interest rates. When the subprime mortgage crisis broke out and countries around the world began to increase loan interest rates to control the proportion of mortgages, their liquidity will be exhausted.

At this time, if there is another run by depositors, it will directly cause a credit crisis - depositors' deposits have been lent out, but due to the impact of the subprime mortgage crisis, many loans cannot be collected for the time being. Now depositors have to withdraw their money. If you can't take it out, you will be completely finished.

You should know that credit is very important in banks or the financial industry. Credit bankruptcy means that almost no one will have any business dealings with you, and you will naturally face real bankruptcy.

...

Today, London is shrouded in drizzling rain. When Barron walked out of the DS Financial Center, he felt the coldness with a damp breath.

Just now at the DS Financial Center, Barron discussed the acquisition of Northern Rock Bank with Davis, the president of Standard Chartered Bank in London, and others. Next, he is about to meet with Darling, the Chancellor of the Exchequer.

The motorcade has been waiting at the door of the DS Financial Center, and on both sides of the door, bodyguards in black suits are vigilantly observing the surroundings.

Barron's personal assistant Wang Wanting held an umbrella to cover Barron's head, and waited until he entered the black extended Bentley Mulsanne. Wang Wanting closed the door and got in from the other side.

When the bodyguards entered the Land Rover Defenders in front and behind the motorcade, the motorcade set off in the increasingly heavy rain, leaving only the halo of the headlights.

This meeting with Darling was a private meeting.

But at such a moment, the conversation between the two was destined to revolve around the consortium formed by Standard Chartered Bank and DS Group to acquire Northern Rock Bank.

Before becoming prime minister, Brown served as chancellor of the exchequer, so it is obvious that Darling, who is now the chancellor of the exchequer, must be Brown's "own man".

But even so, Darling still has his demands on the acquisition of Northern Rock Bank. It is impossible to say that he will be unprincipled and side with Barron - at least if Standard Chartered Bank can finally win, the acquisition conditions must be stronger than other competitors.

After all, in addition to the American consortium participating in the acquisition, Branson, the boss of Virgin Group, has a strong network of connections.

"The current acquisition conditions of various companies are still not satisfactory to us, Your Highness, as I said before, we need the acquirer to promise to repay the loan and interest we provide within three years, and to ensure that Northern Rock Bank will no longer be a problem in the future."

At the beginning, Darling said so bluntly:

"If these acquisition conditions are not satisfactory to us, then we will eventually have to start the nationalization process of Northern Rock Bank."

As Darling, the Chancellor of the Exchequer, said, the main demand of the Ministry of Finance he represents, or the British government, is that the interests of taxpayers should not be harmed first-this means that the 25 billion pounds invested in Northern Rock Bank and the interest must be returned in the shortest time, and the time they require should not exceed three years.

Otherwise, if the government uses government funds to rescue the bank and fails to recover the funds, the government will inevitably be criticized by the people.

Why is it required within three years?

Because three years later, in 2010, another general election will come in Britain. They don't want the rescue of Northern Rock Bank this time to become a weapon used by the Conservatives to attack them.

For Darling, he very much hopes to get the right acquisition conditions for Northern Rock Bank to complete the privatization of the bank, so that the government can complete its rescue work and get out of it.

But the bottom line is that the funds need to be taken back as soon as possible, and they must also have punitive interest, so that they can have an explanation to the public.

If they can't accept those acquisition plans, they can only convert the funds they injected into bank shares and complete the nationalization of Northern Rock Bank. This can also be regarded as an explanation to the public-those shareholders and management who messed up the bank will be expelled and the bank will be taken over by the state.

Therefore, Darling told Barron that the nationalization of Northern Rock Bank he mentioned was not just a threat, but also one of the very likely options.

Barron himself is also aware of this, because in his previous life, the acquisition plans of Northern Rock Bank by those buyers could not be recognized by the British government until February of the next year, and they finally nationalized the bank.

From this, we can also see how determined the British government represented by Darling is in dealing with the matter of Northern Rock Bank, and how difficult it is for them to accept the acquisition plan.

As far as Barron knows, most of the institutions and consortiums participating in the bid for Northern Rock Bank are also difficult to accept the requirement of repaying the government debt and interest of up to 25 billion pounds within three years.

Among them, the consortium led by Virgin Group is willing to repay 11 billion pounds immediately after acquiring Northern Rock Bank, but they need to repay the remaining government loans in longer installments, otherwise it will be difficult to bear such a heavy burden.

In fact, among the competitors other than Standard Chartered Bank, Virgin Group's acquisition conditions are already the closest to the requirements of the British government.

The other competitors, who needed the shortest time, could only promise to pay off the £25 billion debt and interest within five years...