Examination of Witnesses (Questions 740
TUESDAY 16 OCTOBER 2007
Q740 Mr Mudie: Sir Callum said, "I
think it is incorrect to regard the private sector solution as
being a firm, cut and dried offer. It was still at an exploratory
stage." It sounds to me that it was well past an exploratory
stage, and it would have to be to give comfort to the depositors.
Dr Ridley: A degree of exploration
had obviously taken place, yes, but no, there was no firm offer.
We never had an offer on the table.
Q741 Mr Mudie: No, but you would
have got an offer, you are strongly confident, if you had had
Dr Ridley: We cannot be sure of
Q742 Mr Mudie: Your chief executive
seemed to indicate earlier that he would be content with that
and that would have saved the problem.
Dr Ridley: Had an offer come forward
within a day or two on that basis then yes, we would have been
in a better position but of course, you cannot be absolutely sure
that an offer is going to come forward.
Q743 Chairman: Sir Ian, finally,
do you think relations between the Board and the shareholders
of Northern Rock were sufficiently transparent?
Sir Ian Gibson: I think they were,
yes. In fact, to pick up a series of questions asked earlier,
over the years Northern Rock's overall approach has been to be
extremely transparent about the simplicity and straightforwardness
of its model because that has enabled it to disclose the quality
of its book and therefore attract reasonably priced credit. That
has continued too with its shareholders.
Q744 Chairman: The reason I am asking
that is that lawyers for the UK Shareholders Association are now
examining whether there is a potential class action suit against
Northern Rock for withholding crucial information that could have
prevented shareholders from losing millions of pounds. That is
a press comment. Do you feel that Northern Rock should have disclosed
details of the risks to its business model sooner? Why did the
Board wait a whole month before announcing crucial information
Sir Ian Gibson: On the first point,
the risk information about its model was very clearly in the market
and has been for a very long time. It is a very clear presentation
of the company that is given in our annual report. It is a very
straightforward business. It is essentially a UK mortgage-only
business, which some would see as a weakness, others would see
as a strength. It depends on your point of view. The data surrounding
that has been transparent to all for a considerable period, not
just this year but year on year. As for a secondary position,
I think colleagues of yours, Chairman, explored in great detail
with the chairman and the chief executive just now the whole process
that took place from, I guess, 14 August onwards, where we consulted
legal advisers, the UK Listing Authority, the FSA, later the Tripartite,
in terms of what was appropriate to disclose at what point, either
about other party discussions or about discussions with the Bank
of England or about the trading circumstances of the company,
and we are fully satisfied that we did follow the best advice
and follow it to the letter.
Q745 Chairman: I am mindful that
the Governor of the Bank told the Treasury Select Committee that
he was alerted to an impending crisis on 14 August. The shareholder
group is saying they wanted to know why an announcement was delayed
until the rescue package was finalised on September 14, exactly
a month later. What answer is there to that, Sir Ian?
Sir Ian Gibson: You have heard
the answer, that first of all, we were in a series of discussions
with not just the one party that has been focused on right now
but a number of potential acquisition partners, and through that
period, with the advice of the UKLA and the FSA, as well as our
lawyers, it was not suitable to put information into the market.
We were, by the way, continuing to fund, as has been pointed out,
varying amounts different days, but we were always continuing
to fund; we were always liquid. The profits that we are now forecasting
for `07 are in the market and profit warnings were issued at the
appropriate times in all cases. Once we were in discussions with
the Bank of England, our guidance from all involved, including
clearance with the UKLA, was that those discussions be not made
public because there are circumstances, and we have certainly
seen the results of those circumstances, that mean it is not appropriate
in the view of the listing authority or the FSA that certain of
those discussions are taken to the market, and they might be for
a different business.
Q746 Chairman: Finally, can I ask
you to give us a message in terms of the future of Northern Rock
over the next six, nine months to reassure people.
Sir Ian Gibson: First of all,
it is a bank that remains in business, that is solvent, that is
serving its customers, that is paying its debts, that is paying
its employees, and it continues to wish to do that and will strive
in every degree to do that. Secondly, we know we have the period
essentially between now and the end of this year in which to work
out the most appropriate strategy for the bank, for the company,
for its shareholders, for its creditors, for its stakeholders
and for its employeeswe have all those groups to consider,
and we willand to bring that to the Tripartite group and
obtain what consents and appropriate support are necessary for
whichever of the range of solutions that we end up choosing, and
to do that in such a fashion that people will say post that event
... From my viewpoint, I hope they say "They did the best
that anybody could," because that is what I want them to
say and I hope that committees like this are able to say, "In
the light of quite unpredictable, unforeseen circumstances, they
made a decent fist of it in the end."
Chairman: We have a long way to go there
because we are looking at the Tripartite agreement and to date
not many people have taken responsibility, so that is a conundrum
for us which we want to examine over the next few months. Can
I thank you for your attendance this morning.