The UK Treasury announced on Friday it bought all the shares in troubled bank Northern Rock, including its preference shares, and that an order setting up compensation for shareholders will be sent to parliament shortly.
Shareholders in Northern Rock, which received more than 25 billion pounds ($49 billion) in government support funds since it ran into trouble last year, have criticized the government for nationalizing the bank, saying they need to be compensated.
“The principles for assessing any compensation … reflect the principle that the government should not be required to compensate shareholders for value which is dependent on taxpayers’ support,” a Treasury statement said.
The listing of Northern Rock’s ordinary and preference shares was canceled, the statement said, but the company’s debt securities will continue to trade.
Nationalizing Northern Rock was the best solution to protect the taxpayers, Darling said. The bank’s shares were suspended from trading on the London Stock Exchange on Monday. Last Friday’s closing price was 90 pence.
The government was analyzing two bids from the private sector but decided to put the bank in state hands at the weekend. Parliament passed legislation allowing the bank's nationalization on Thursday.
Restructuring plans for Northern Rock will need the approval of the European Union, under EU rules regarding state aid.