Policy paper

Withdrawal of guarantee arrangements

Published 11 June 2020

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This publication is available at https://www.gov.uk/government/publications/withdrawal-of-the-guarantee-arrangements-for-nram-and-bradford-bingley/withdrawal-of-guarantee-arrangements

This announcement concerns various guarantee arrangements that were put in place by HM Treasury in respect of certain liabilities of Northern Rock in 2008 and Bradford & Bingley in 2009 after these two institutions came into public ownership.

The guarantee arrangements were put in place through press notices issued by HM Treasury at the time. Those press notices state that reasonable notice, which will be not less than three months, will be given prior to the withdrawal and termination of the guarantee arrangements.

As the liabilities covered by the guarantee arrangements referred to in this announcement have now been discharged in full, HM Treasury today announces that it is giving notice that these arrangements will be irrevocably withdrawn and terminated in full on 14 September 2020.

Background and description of guarantee arrangements

Northern Rock

On 22 February 2008, the Northern Rock plc Transfer Order 2008 took effect to transfer the entire issued share capital of the entity then known as Northern Rock plc into public ownership.

On 1 January 2010, the Northern Rock plc Transfer Order 2009 took effect to restructure the existing business of the entity then known as Northern Rock plc into two separate legal entities:

  • a new entity was created (referred to as “Northern Rock plc” in this announcement) which took on the existing retail and wholesale deposit business (other than certain wholesale deposits held on behalf of the Granite securitisation and covered bond programme), a proportion of the unencumbered mortgages and the mortgage origination and servicing platform; and
  • the legal entity then known as Northern Rock plc (referred to as “Northern Rock (Asset Management) plc” in this announcement) retained the balance of the mortgage book (including mortgages allocated to the Granite securitisation and the covered bond programme), the Government loan, the other borrowings, derivatives and certain wholesale deposits held on behalf of the Granite securitisation and covered bond programme.

On 8 December 2009, in support of the separation of the Northern Rock business outlined above, the Chancellor of the Exchequer announced that the following guarantee arrangements would enter into force upon the separation taking effect:

  • Northern Rock plc: guarantee arrangements to continue to safeguard retail deposits, unsecured wholesale deposits, unsecured and unsubordinated wholesale borrowings and unsecured derivative transactions; and
  • Northern Rock (Asset Management) plc: guarantee arrangements to continue to safeguard unsecured wholesale deposits, unsecured and unsubordinated borrowings (including its EMTN programme) and unsecured derivative transactions

The guarantee arrangements described above were a continuation of the arrangements originally put in place by HM Treasury prior to Northern Rock plc (as it was then known) being taken into public ownership.

On 24 February 2010, HM Treasury announced the withdrawal of certain guarantee arrangements in respect of Northern Rock plc relating to retail deposits and certain wholesale borrowings.

Between April and May 2016, Northern Rock (Asset Management) plc underwent a reorganisation pursuant to which it was substituted by NRAM Limited as principal debtor of the EMTN programme.

In anticipation of this substitution, on 13 November 2015, HM Treasury announced that equivalent guarantee arrangements would apply in respect of NRAM Limited as principal debtor under the EMTN Programme on the same terms as originally announced on 8 December 2009.

Bradford & Bingley

On 29 September 2008, the Bradford & Bingley plc Transfer of Securities and Property etc. Order 2008 took effect to transfer the retail deposit book and branch network of Bradford & Bingley plc (referred to as “B&B” in this announcement) to Abbey National plc and transfer the entire issued share capital of B&B (together with the remaining assets and liabilities of B&B) into public ownership.

At the same time, the Chancellor of the Exchequer announced that HM Treasury would put in place guarantee arrangements in respect of certain of B&B’s wholesale deposits and unsecured and unsubordinated wholesale borrowings and derivative transactions. In respect of the guarantee arrangements relating to borrowings, wholesale deposits and derivative transactions, the scope of HM Treasury’s obligations extended to paying or repaying (as applicable) such liabilities when they fall due.

Notice of withdrawal of guarantee arrangements in respect of Northern Rock and Bradford & Bingley

The guarantee arrangements referred to in this announcement provide that reasonable notice, which will not be less than three months, will be given of their withdrawal and termination. As all of the liabilities covered by the guarantee arrangements referred to in this announcement have now been discharged in full, HM Treasury today announces that it is giving notice of their irrevocable withdrawal and termination on 14 September 2020.

Technical note:

  1. Notwithstanding any further announcement made by HM Treasury, the withdrawal and termination in full of the guarantee arrangements referred to in this announcement shall take effect on 14 September 2020.

  2. In addition to the withdrawal and termination in full of the guarantee arrangements referred to in this announcement, any and all other obligations, undertakings, commitments or liabilities of HM Treasury arising out of or in connection with the resolutions of B&B and the entity that was originally known as Northern Rock plc at the time of its nationalisation (including in respect of Northern Rock (Asset Management) plc and NRAM Limited) shall also be irrevocably withdrawn and terminated in full.

  3. HM Treasury has also made arrangements separate from the guarantee arrangements referred to in this announcement, pursuant to paragraph 10 of Schedule 3 of the Bradford & Bingley plc Transfer of Securities and Property etc. Order 2008, to secure that the assets of the B&B pension scheme are sufficient to meet its liabilities. HM Treasury has also provided a credit support deed to UK Asset Resolution (UKAR) with respect to the NRAM and Bradford & Bingley pensions schemes, as announced in May 2019. The withdrawal and termination of the guarantee arrangements referred to in this announcement do not affect the separate arrangements in respect of the B&B pension scheme or the credit support deed provided to UKAR, which will remain in place.

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