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| Version 2 | Version 3 |
|---|---|
| Rock pledges to repay taxpayers | Rock pledges to repay taxpayers |
| (40 minutes later) | |
| Newly-nationalised bank Northern Rock has promised to repay its £24bn state loan by 2010 despite warning that it would not break even for three years. | |
| The bank said it would be significantly loss making in 2008, after posting a pre-tax loss of £167.6m in 2007. | |
| Northern Rock also revealed that it will pay former chief executive Adam Applegarth a total of £785,000 as part of his severance agreement. | Northern Rock also revealed that it will pay former chief executive Adam Applegarth a total of £785,000 as part of his severance agreement. |
| Shareholders have criticised the payout after the bank ran into problems. | |
| Staff cuts | |
| Northern Rock had to be rescued by the Bank of England in September 2007 after coming close to insolvency. | Northern Rock had to be rescued by the Bank of England in September 2007 after coming close to insolvency. |
| BBC business editor Robert Peston said any severance payments to Mr Applegarth were always likely to provoke controversy. | BBC business editor Robert Peston said any severance payments to Mr Applegarth were always likely to provoke controversy. |
| However, he added that the £760,000, plus £25,000 in non-cash and other benefits, that Mr Applegarth will receive is less than his contractual entitlement. | However, he added that the £760,000, plus £25,000 in non-cash and other benefits, that Mr Applegarth will receive is less than his contractual entitlement. |
| One contributor to the bank's loss was just under £50m of payments to City firms and professional advisers, incurred by it and the government when it was struggling to avoid nationalisation. | One contributor to the bank's loss was just under £50m of payments to City firms and professional advisers, incurred by it and the government when it was struggling to avoid nationalisation. |
| As it tries to get back on its feet, Northern Rock said it would cut costs by 20%, and trim staff numbers by a third over the next three years. | |
| It also wants to have a smaller business and plans to reduce its balance sheet to close to £50bn from about £107bn. | |
| Wider problems | |
| Northern Rock ran into trouble after problems in the US housing market prompted a global credit crunch. | |
| Faced with deteriorating market conditions, many banks stopped lending to each other and Northern Rock's main source of financing dried up. | |
| As a result, it was forced to approach the Bank of England for emergency funding, which prompted a run on the lender, the first on a UK bank in more than 100 years. | |
| Critics have blamed the bank's former management, and in particular Mr Applegarth, for borrowing too much money from the financial markets to fund Northern Rock's business. | |
| They have complained that the bank's aggressive lending policy and a failure of oversight from market regulators led to the nationalisation of Northern Rock and a slump in the value of their investments. |