No Payout for Northern Rock Shareholders

Northern Rock has bowed under the pressure from the Financial Services Authority and the Treasury has decided against paying out the interim bonus that was declared in July, just a month before the August’s turmoil.  

The interim bonus is reported to be worth £59million.  This latest change of heart may result in senior officials losing their jobs.  It has also been rumoured that Northern Rock could be facing a break up by hedge funds and private equity firms in the United Kingdom and the United States.  If this does happen, it could mean that shareholders receive little, if anything at all, in the way of a bonus.  

Our view

It is no surprise that a dividend will not be paid to shareholders.  Let us keep this in perspective.  Lenders borrow millions everyday from commercial and the Bank of England to ensure the smooth inflow and outflow of monies.  If certain journalists at a well known TV channel had not over dramatised the issue and the Bank of England not called the loan an ‘Emergency Loan’ there would not have been consumer panic and the first ‘run’ on a bank in 150 years.  

The Bank of England, the press and indeed lenders themselves need to look long and hard about what their lending policy is and at reporting procedures are.

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