NORTHERN Rock could be left as nothing more than a “zombie bank” unless the Government eases its strict sale criteria. The Treasury’s demand that the £25bn loaned to the bank is repaid within three years has left investors wondering if the only option would be to run down the business with it surviving only as long as it takes to pay off the debt. The so called “zombie bank” would never be able to make a profit and would be forced to shed staff as it sold off more and more of the mortgage book to pay off the loan. Olivant have already pulled out of the race to buy the Rock, with suggestions that the Government’s insistence on the three-year repayment made the sale unviable. There is speculation that the Treasury may consider extending its repayment deadline in order to tempt Olivant back into negotiations. In an interview with The Journal, Rock chief executive Andy Kuipers said the “zombie” label was wrong and insisted the bank could continue as a profitable North-East employer – but not without some job losses. Mr Kuipers said: “We very much refute that description. We will still keep the franchise open, we will attract deposits and still offer mortgages. There are different ways to mange this business and I think ‘zombie’ bank is a very unfair word. We are not in that situation. We are a bank that has to go back a couple of years in size and then emerge as a well capitalised profitable bank.” He added the Treasury had been notified of the job losses that could be needed, but would not reveal the expected number of redundancies. Mr Kuipers agreed the three-year loan repayment target did mean changes would be needed at the bank. He said: “There are only two ways to repay the loans. Either shrink the balance sheet – mortgages – or attract retail funds. “That second option is complicated because Brussels rules on state aid say we really can’t do that. “So it is more likely we use the mortgage book to help pay off the debt. That means it will come down in size, which means a small business run-down until it stabilises again. That obviously has downward pressure on jobs and we are well aware of that. “It is too early to say how many jobs will go because we are still working on a plan to minimise job pressure by restructuring the company. We are fairly confident that we can preserve a lot of jobs just by restructuring the company.” A spokesman for Virgin said the business would avoid the “zombie bank” stigma if it was re-branded as part of Virgin Money. They insist the revived bank would be capable of paying off the debt within three years thanks to the “Branson effect”. The two largest shareholders, RAB Capital and SRM Global, which hold 18% between them, have said they prefer the management plan over the Virgin one. The Treasury has yet to disclose a timetable for picking its preferred bidder. It had hoped to announce this by next Monday | 
North East regional news from the Evening Chronicle, The Journal and the Sunday Sun.
