Granite and Northern Rock inquiry
Closed
What the inquiry looked at
“The disposal of former Northern Rock mortgages and loans in 2015 was the government's largest ever financial asset sale. In November 2015 the government disposed of £13.3 billion former Northern Rock mortgages and loans to a consortium led by US private equity group, Cerberus. The sale, conducted by the UK Asset Resolution (UKAR) which is owned by HM Treasury, comprised of £11.9 billion of mortgages from the Granite debt financing vehicle within Northern Rock Asset Management (NRAM) and additional loans (£1.4 billion). The taxpayer received £5.5 billion in cash while Cerberus took on nearly £8 billion in liabilities. Some 270,000 mortgages and loans were sold in the deal. The Public Accounts Committee will look to examine the preparations for the sale—including its rationale and objectives, and whether it was structured in a way to deliver value for money and also the execution of the sale; including whether sufficient competitive tension existed to maximise bids, and whether consumer protection was adequately considered. The inquiry will also look at Government's valuation of the asset, including whether the valuations were designed appropriately and based on sound assumptions, and whether the tax positions of bidders were considered appropriately.”
The committee's words, from the inquiry page on parliament.uk ↗.
What it found
UK Asset Resolution (UKAR) took advantage of good market conditions and strong investor demand to sell £13.3 billion of former Northern Rock loans in the UK Government’s largest ever financial asset sale. The transaction was executed successfully within a tight timeframe. Competitive tension between bidders was achieved resulting in a final price that was slightly more that the outstanding value of the loans sold.
While there are many positives from the sale there are also areas for improvement particularly during the preparation phase: there was no formal business case for the sale bringing together in one document all the information needed to make critical decisions; the potential value of alternative sale options was not quantified before the transaction began; and the financial adviser was selected without an open competition.
HM Treasury should also have done more to consider the wider implications of the sale by scrutinising the impact on customers and tax revenues more thoroughly.
What the government said
No government response is linked to this report.
How the inquiry ran
Each dot is a dated item listed on this page, from the inquiry's opening on 9 August 2016 to its close on 4 January 2018.
- Oral evidence 12 Sep 2016
- Report 9 Nov 2016
What it recommended
The committee's recommendations are not listed here yet. Read them in 24th Report - The sale of former Northern Rock assets ↗ on parliament.uk.
Evidence
Oral evidence sessions 1
- 12 Sep 2016No witnesses recordedparliament.uk ↗