Page last updated at 11:18 GMT, Tuesday, 14 October 2008 12:18 UK

No legal case against Rock bosses

Northern Rock
Northern Rock was nationalised in February this year

Nationalised lender Northern Rock has said it will not take legal action for negligence against the executives in charge of the bank before its collapse.

Management said a review by lawyers and accountants into the management led by chief executive Adam Applegarth found "insufficient grounds" to proceed.

The probe concluded the firm's auditors should also avoid any action.

The lender also said it was "well ahead" in repaying the 26bn it had been loaned by government.

About 57% of the debt had been paid back by 30 September, with 11.4bn outstanding.

Ron Sandler, the firm's non-executive chairman, said he was "pleased" with the progress but said the Rock was still "significantly loss-making" and that returning it to profit and back to private ownership was "some years away".

'Turbulent world'

After nationalisation, the bank said it aimed to break even by 2011.

"Clearly in the turbulent world we face now that's a more challenging target, but that's still what we are working towards," Mr Sandler added.

Northern Rock was nationalised in February - having had to go to the Bank of England for financial support last year.

Its business model, which relied heavily on borrowing from money markets to fund its mortgage lending, crumbled when a change in market conditions made it harder and more expensive for it to borrow.

And the Rock has cut its staff from about 6,000 people to 4,500 as it cut costs.

Shedding borrowers

Last month, the firm withdrew a number of savings deals to new customers to ensure it did not abuse any advantage it had from being a government-backed institution.

The nationalised bank is one of few financial institutions that has a 100% guarantee for the safety of customers' savings.

It also raised many of its mortgage rates to encourage customers to move elsewhere as it tried to cut its lending book.

Mr Sandler said it was "too early to say" how this week's part-nationalisation of Royal Bank of Scotland, Lloyds TSB, and HBOS would change the UK's banking landscape.

Bonus potential

Having been brought in to run the bank after its nationalisation, Mr Sandler was replaced as chief executive by Gary Hoffman on 1 October.

His salary, which was 90,000 a month, will now be 350,000 a year, with possible bonuses.

Since the Northern Rock was nationalised, Bradford & Bingley has also been taken into government ownership.

Mr Sandler said that there had been "informal and oblique" talks about merging the mortgage books of the two lenders but that no "substantive talks" had been held.

"Given everything else which is going on, it is not an issue that will get anywhere near the top of the agenda for quite some time," he added.


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