SIR RICHARD BRANSON was today linked with a possible buyout of troubled bank Northern Rock.
According to reports, the billionaire entrepreneur's Virgin Group is in talks to take on Britain's fifth-biggest mortgage lender, which recently suffered the humiliation of seeing savers queue outside branches to withdraw their savings.
It is thought that Virgin has already met with Northern's management and that it is trying to put together a consortium with investors from the Middle East and the United States that will aim to inject cash into the bank in exchange for a controlling stake.
A tie-up could see the mortgage lender's operations merged with the firm's Virgin Money business, which already offers mortgages, credit cards and insurance services.
No-one from Virgin or Northern Rock was immediately available for comment on the newspaper report, which quoted an unidentified person with knowledge of the negotiations.
Virgin is one of a number of possible suitors said to be circling Northern Rock, which has seen its share price plunge by more than 80 per cent after it was forced to seek emergency funding from the Bank of England last month.
That news sparked the first run on a UK bank for 150 years, as customers rushed to withdraw their funds to safeguard their savings.
Richard Branson may bid for the troubled bank
Newcastle-based Northern has been the biggest UK casualty so far of the fall-out from the US sub-prime mortgage lending crisis that rocked financial markets.
That in turn led to a liquidity squeeze where banks were reluctant to lend money to each other. As Northern was hugely reliant on the international wholesale money markets to raise the money it needed to fund its mortgage lending, it suffered more than most lenders as it was forced to borrow cash from the Bank of England at higher-than-market rates.
Earlier this month, it emerged that New York-based private equity firm JC Flowers had raised £15 billion and was thought to be preparing a bid for the bank, while private equity firm Cerberus is also understood to be interested in the firm's assets.
Other names in the frame have included Blackstone and Apax, although no formal offers have yet been tabled.
Banking giant Citi has also agreed to be on hand to lend Northern Rock some £10bn to help ease its funding crisis.
It is understood that Virgin is putting together a finance package that could involve the loan from Citi, and would seek to take control of the group through the issuing of new shares.
The crisis at Northern Rock has led to major criticisms of the banking regulatory system. Chancellor Alistair Darling said yesterday he was looking to introduce new legislation to increase protection for savers' deposits.
The Government has already guaranteed to protect customers' funds at Northern Rock, including all new accounts opened since the troubles took hold last month.
Earlier this week the Financial Services Authority admitted that some aspects of its supervision of Northern Rock were "inadequate" and that the effects of the bank's spiralling crisis had been damaging to the UK.
The FSA's chairman Sir Callum McCarthy and its chief executive Hector Sants admitted the shortcomings as they were grilled by MPs.
They told the House of Commons Treasury Select Committee that they recognised "the great inconvenience and anxiety" which Northern's problems had caused for its customers.
The full article contains 564 words and appears in Edinburgh Evening News newspaper.
