Advertisement

Northern Rock's small but extremely expensive mistake

Buildings are reflected in the windows of Northern Rock's Leicester branch in 2008. Photo: REUTERS/Darren Staples

Small mistakes can have extremely expensive consequences.

The government has just announced that Northern Rock Asset Management, the bit we still own, has made errors over the last four years on letters and statements to its customers.

As many as 152,000 of them may not have been told how much their original loan was for on documents sent to them by the bank.

Might not sound like a big deal. But the rules say your lender is obliged to give you that information on your correspondence.

The fact that they didn't, means the bank has to give back all the interest that has been paid over that time - essentially the mistake annulled the loan arrangement.

The total compensation package will come to around £270 million. A very expensive error for this taxpayer owned body, and a major embarrassment for the institution that is meant to have been the cleaned up part of the collapsed and discredited Northern Rock.

With this, three arrests in the investigation into rate rigging on the markets and whopping fines for HSBC, I wonder if it ever feels like a good day to be a banker?

More on this story