Concern at Rock's off-balance-sheet vehicles

Confusion arose last night over whether the nationalisation of Northern Rock could result in the Government running its own offshore, off-balance-sheet vehicle – an arrangement ministers have lambasted private sector firms for using.

Separately, opposition MPs expressed concern about whether the Government has lost control of the better part of the Northern Rock mortgage book to an offshore trust, being left with the "rubbish", in the words of the former Tory chancellor Kenneth Clarke.

In its latest statement of the treatment of Northern Rock in the national accounts, the Office for National Statistics said "some parts" of Granite, Northern Rock's off-balance-sheet "special investment vehicle" or SIV, will be visible in the public accounts: "ONS judgement was to classify to the public sector the UK-resident special purpose vehicles used in the securitisation programme." But those parts of Granite that are offshore (registered in Jersey) will effectively be off the public sector's balance sheet – even though they are potential liabilities for the taxpayer.

Granite is used by the Rock to securitise its mortgages. It is split into three entities. One company issues bonds, and is registered in the UK; a trust company holds the mortgages and is registered in Jersey; another group of companies move money between the others and are partly registered in Jersey. The trust has £45.7bn of securitised mortgages.

Such arrangements jar with the Chancellor Alistair Darling's recent remark that "there needs to be better regulation to stop banks hiding things off-balance-sheet".

However, Yvette Cooper, the Chief Secretary to the Treasury, said Granite was a "separate legal entity, which will not be covered" by nationalisation. Philip Dunne, a Conservative MP, said: "Northern Rock retains a seller's share in the packages of mortgages provided to Granite to provide security for the debt obligations that Granite issues." Those mortgages, he said, must be "refreshed continually" with a new supply of mortgages from Northern Rock, or "liabilities will crystallize, there will be a default."

The Rock sold half its mortgages to Granite between 1999 and September 2007, but Mr Darling said it still had "high quality" assets.

Start your day with The Independent, sign up for daily news emails
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Pricing Analyst

£30 - 35k: Guru Careers: We are seeking a Pricing Analyst to join a leading e-...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K YR1: SThree: At SThree, we like to be dif...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is a mul...

Guru Careers: C# Project Team Lead

£55 - 65k (DOE): Guru Careers: A unique opportunity for a permanent C# Develop...

Day In a Page

Blundering Tony Blair quits as Middle East peace envoy – only Israel will miss him

Blundering Blair quits as Middle East peace envoy – only Israel will miss him

For Arabs – and for Britons who lost their loved ones in his shambolic war in Iraq – his appointment was an insult, says Robert Fisk
Fifa corruption arrests: All hail the Feds for riding to football's rescue

Fifa corruption arrests

All hail the Feds for riding to football's rescue, says Ian Herbert
Isis in Syria: The Kurdish enclave still resisting the tyranny of President Assad and militant fighters

The Kurdish enclave still resisting the tyranny of Assad and Isis

In Syrian Kurdish cantons along the Turkish border, the progressive aims of the 2011 uprising are being enacted despite the war. Patrick Cockburn returns to Amuda
How I survived Cambodia's Killing Fields: Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape the US

How I survived Cambodia's Killing Fields

Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape to the US
Stephen Mangan interview: From posh buffoon to pregnant dad, the actor has quite a range

How Stephen Mangan got his range

Posh buffoon, hapless writer, pregnant dad - Mangan is certainly a versatile actor
The ZX Spectrum has been crowd-funded back into play - with some 21st-century tweaks

The ZX Spectrum is back

The ZX Spectrum was the original - and for some players, still the best. David Crookes meets the fans who've kept the games' flames lit
Grace of Monaco film panned: even the screenwriter pours scorn on biopic starring Nicole Kidman

Even the screenwriter pours scorn on Grace of Monaco biopic

The critics had a field day after last year's premiere, but the savaging goes on
Menstrual Hygiene Day: The strange ideas people used to believe about periods

Menstrual Hygiene Day: The strange ideas people once had about periods

If one was missed, vomiting blood was seen as a viable alternative
The best work perks: From free travel cards to making dreams come true (really)

The quirks of work perks

From free travel cards to making dreams come true (really)
Is bridge the latest twee pastime to get hip?

Is bridge becoming hip?

The number of young players has trebled in the past year. Gillian Orr discovers if this old game has new tricks
Long author-lists on research papers are threatening the academic work system

The rise of 'hyperauthorship'

Now that academic papers are written by thousands (yes, thousands) of contributors, it's getting hard to tell workers from shirkers
The rise of Lego Clubs: How toys are helping children struggling with social interaction to build better relationships

The rise of Lego Clubs

How toys are helping children struggling with social interaction to build better relationships
5 best running glasses

On your marks: 5 best running glasses

Whether you’re pounding pavements, parks or hill passes, keep your eyes protected in all weathers
Joe Root: 'Ben Stokes gives everything – he’s rubbing off on us all'

'Ben Stokes gives everything – he’s rubbing off on us all'

Joe Root says the England dressing room is a happy place again – and Stokes is the catalyst
Raif Badawi: Wife pleads for fresh EU help as Saudi blogger's health worsens

Please save my husband

As the health of blogger Raif Badawi worsens in prison, his wife urges EU governments to put pressure on the Saudi Arabian royal family to allow her husband to join his family in Canada