Today, the European Commission announced it has extended the scope of its April 2 in-depth investigation into the UK's aid package and restructuring plan for Northern Rock Plc. The Commission is seeking more information from UK authorities on recent amendments to the restructuring plan to split Northern Rock into a "good bank" containing Northern Rock's good quality assets, its mortgage origination platform and its retail deposits, and a "bad bank" which would hold the vast majority of its existing mortgage loans, which would subsequently be wound down, with the UK supporting the losses incurred on those "risky" mortgage loans. The original UK restructuring plan contemplated shrinking Northern Rock's lending operations and its balance sheet, repayment of the loans granted by the Bank of England and the gradual phase out of UK government guarantees on Northern Rock's funding operations, with the expectation that the bank would "find funding from other sources, notably by rebuilding the level of its retail deposits."
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European Commission widens investigation into restructuring plan for Northern Rock
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