Mission accomplished: Britain’s ‘bad bank’ to shut doors by 2021

The UK’s “bad bank” could finally be wound up in 2021 in a “landmark” moment more than a decade on from the financial crisis, its chief executive said today.

UK Asset Resolution was formed by the government in 2010 to manage the mortgage book of failed Bradford & Bingley, and the riskier parts of nationalised Northern Rock shunned by Virgin Money.

The company has been charged with running down a balance sheet that stood at £115.8 billion eight years ago, to repay state support for the bailout. It has returned a total of £38.4 billion taxpayer loans so far, almost 80% of the total outstanding.

Results today, however, showed that the balance sheet now stands at just £14.8 billion, a fraction of the previous total, after repayments by mortgage customers moving to other lenders and selling chunks of the loan book.

The remainder could be sold off in one or two parcels, depending on value-for-money considerations, chief executive Ian Hares said.

Hares said the 2021 target was “the most specific we’ve ever been”. He added: “It will be a landmark moment when we get there, if we get there. There’s still a lot of work to do before we do but we think it is a realistic proposition.

“Market demand for our assets remains strong so we remain confident that we can do it in that timeframe.”

UKAR has been left with 131,000 mortgages, the bulk of which were Northern Rock’s notorious “Together” loans, which offered customers up to 125% of the value of their house in the run-up to the financial crisis, as well as Bradford & Bingley buy-to-let loans. Northern Rock was nationalised in 2007 and B&B foundered in 2008.

But state support is unlikely to end after the loan book is run down as the Government must still decide the fate of Northern Rock’s and B&B’s final salary pension schemes, which have some 6500 pensioners and 3000 deferred members between them.

A buyout of the scheme is likely to be “expensive” according to Hares, who said the Government could instead decide to take the £2.1 billion assets of the schemes onto the public balance sheet and pay the pensions. The Treasury went down this route in 2013 when it took on the £28 billion Royal Mail pension assets ahead of its flotation.