Wednesday, July 23, 2008
British bank Northern Rock has appointed the vice chairman of Barclays as its new chief executive. After 26 years at Barclays—the last two of which were as vice chairman—Gary Hoffman will replace Andy Kuipers. Kuipers, who has been with Northern Rock for 20 years, will be replaced at the beginning of October.
Last September, Northern Rock suffered the first run on a British bank in over 100 years, and was forced to become nationalised. Today, Hoffman stated he would return the bank to private ownership “as a thriving, stable business”. Some of his past roles include chairman of banking and chairman of Barclaycard. In his new role, he is expected to cut 2,000 of the 6,000 jobs provided by the company in an attempt to be able to pay back money owed to the Bank of England. He is to earn £700,000 per year, plus £400,000 in compensation from losses due to his moving. Including a bonus, he is expected to earn £1.5 million in his first year, making him Britain’s highest paid public servant. Among other tasks, he will be working to pay back the £25bn loan Northern Rock got from the Bank of England by 2010, and reducing its mortgage lending from £100bn to £50bn.
Northern Rock hit problems in September 2007. Issues in the mortgage market and public concern over the stability of the bank saw queues form with people keen to withdraw their funds following emergency support being provided by the Bank of England. With share prices plummeting as a result of issues in the United States sub-prime mortgage market, an unprecedented crisis struck one of the UK’s largest banks. By February 2008, the decision was taken to move the bank into public ownership and it was nationalised. Today’s appointment is the first step on a road to returning the bank to private ownership with significant measures required to cut the bank’s costs, repay loans from the Bank of England, and transform the institution into one which is attractive to the stock market.