Northern Rock Plan to Reward Top Executives Despite Reporting Loss of £1.4 bn
Friday, March 6, 2009 12:10
A fresh dispute over rewards for banker failure erupted as Northern Rock said that it was planning to pay bonus to senior executives even as it just reported a £1.4 bn loss.
Of the £1.4 billion of losses for all of 2008, £900 million was due to borrowers defaulting on their mortgages, unsecured loans and credit cards, and £300 million was due to investment losses by the bank’s treasury department. Another £200 million is understood to be due to exceptional charges relating to staff redundancies and fees paid to outside advisers.
The controversial pay scheme emerged as the nationalised bank, with the backing of the Treasury, announced a spectacular strategic U-turn, abandoing its drastic slimdown policy in favour of a new £14 billion mortage lending splurge. The lending push will be funded by the Government, which will inject up to £3 billion of new capital into the bank and lend it up to £10 billion more, reversing the previous policy of calling in loans to the bank as quickly as possible.
According to opinion by criticists, “the policy U-turn exposed the fatuity of the strategy of past 11 months. It proves to be incredibly financially naive and misguided. People have lost their jobs and homes unnecessarily.”
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