Jobs to go at nationalised Rock

By Simon Duke for MailOnline
Updated:

 

The Northern Rock fiasco will leave the Government in the unprecedented and bizarre position of having to run a High Street bank.

Northern Rock queue

The Government will fear a repeat of the run on Northern Rock.

Ministers are likely to get the blame if repossession orders against Rock mortgage-holders rise, branches and jobs are axed and the Labour stronghold North East suffers economically.

The Government also faces a political crisis, with the fate of the Rock likely to dominate debate for the coming weeks and the Conservatives determined to make it as defining as Black Wednesday was for them in 1992.

Chancellor Alistair Darling, who had been forced to dismiss suggestions that his job was already under threat, will remain in place to clear up the mess but his longer-term future looks in doubt.

The Rock's new chief executive Ron Sandler will need to draw on all his expertise as one of the City's sharpest troubleshooters.

As chief executive of Lloyd's of London, Sandler was credited for bringing the insurance market back from the edge of oblivion in the 1990s. But the feat he has been asked to perform at Northern Rock - making the bank viable for a later sell-off - looks likely to be just as daunting.

After emergency legislation is unveiled today by the Treasury, Sandler will travel to Newcastle during the week to take stock. First on his 'to do' list will be to cull most of the current management team. Chairman Bryan Sanderson and chief executive Andy Kuipers are expected to be the first to go.

Many more senior figures will be sacked, with Sandler expected to wield the axe to a bloated management team.

Once his own management team is in place, which will take a couple of weeks, Sandler will decide how rapidly he will shrink the bank.

Experts say that more than 3,000 of Northern Rock's 6,500 workforce could go. Branch closures, too, could be in the offing.

A vastly-reduced Rock, focused on servicing its North-East heartland, is unlikely to need 68 branches around the country.

The new bank also faces important strategic considerations. As he will be running a state- owned bank, Sandler will have to decide how aggressively the Rock should seek out new customers.

Government sources say the nationalised bank is not expected greatly to expand its mortgage book,

But if it is seen to be using its state guarantee to undercut other companies it could soon be facing legal action.

One senior industry source said: 'If we see a government-owned bank jousting for new business, then nationalisation is not a good option.' Sandler will also have to pass muster with regulators at the European Commission, who have been keeping a close eye on the Rock debacle for signs that strict rules on state aid to companies are not being breached.

In the meantime, the bank faces the threat of a new 'run' on its branches by customers angry at the Government's mishandling of their money.

Despite Mr Darling's guarantee that savers' money will remain safe, branches were preparing last night for a repeat of September's astonishing scenes.

Then, thousands of panicking Northern Rock customers queued for hours outside the bank's branches to withdraw their savings.

Northern Rock nationalisation

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Northern Rock branch

In reality, there would be little point in anybody rushing to withdraw their money from Northern Rock now.

By nationalising the Rock, the Government has ensured that the bank will remain operational until it can be taken back into private ownership. That process will take at least a year.

Nonetheless, the Northern Rock brand has taken a battering over the past six months - and the nationalisation announcement could provoke remaining savers to take out their money.

As for the Rock's shareholders, they face the possibility of receiving little or nothing in return for shares that were worth more than £12 each last year.

Mr Darling said they would receive compensation but the amount to be paid per share would be determined by an independent arbitration committee.

Yesterday it was unclear how much each investor would receive - but financial experts claimed that it could be next to nothing.

Robin Ashby, founder of the Northern Rock Small Shareholders' Group, said: 'I am shocked and appalled that the Government has decided to do this.

'It's terrible for Britain's reputation as a financial centre and bad news for the shareholders having the bank stolen away from them.'

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The poker player with £90 a month in chips

So who is the man deemed to be worth £90,000 a month as he takes charge of the Rock?

Ron Sandler, 55, lists poker as one of his favourite pastimes but according to those who know him, the card table is the only place where he is prepared to take risks.

He is regarded as the sensible choice; a friend of Gordon Brown and with a track record of taking on difficult and controversial jobs.

Not only did he lead the rescue of the insurance market Lloyd's of London when it came close to collapse in 1995, but he was also appointed by the Treasury to conduct a wide-ranging review into the savings industry in 2001.

The Sandler Report was to prove a damning indictment of the industry and led to the creation of stakeholder savings products including pensions.

Married with two children, Mr Sandler was born in Zimbabwe, the son of a doctor. He graduated from Cambridge University with a first-class degree in engineering and went on to gain an MBA from Stanford University in the U.S. before joining the Boston Consulting Group in 1976. He spent years working as a management consultant and then as a money broker but it was when Lloyd's hit the buffers that his talent as a troubleshooter was spotted.

Despite little experience in the field, he was brought in as chief executive by chairman Sir David Rowland.

His brief was to settle the acrimonious disputes between the industry and wealthy underwriters which threatened the survival of the world's most famous insurance market. By 1999, he had been snapped up by NatWest at a time when the bank was attempting to fight off bids from Bank of Scotland and the Royal Bank of Scotland.

And although this time he ended up on the losing team, he won respect for the battle he fought, earning himself the nickname Rocket Ron.

Since the 2002 Sandler review, he has taken on a number of roles including work with financial education charity pfeg, insurance firm Paternoster and the IT firm Computacenter.

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