Northern Rock has reported much lower pre-tax losses of £257.2 million for the year 2009 as against £1.3 billion for the previous year. Alastair Darling, the Chancellor, now says that it is not impossible that the taxpayers would see a profit from the "good" part of Northern Rock and the winding down of the old mortgage assets. The bank repaid only £1.3 billion during the year off its £22 billion government loan and expects to repay up to half within five years but says that full repayment could take 20 years because of the length of the mortgages. Alistair Darling said that there is no need to for any rushed sale of Northern Rock before the election while other government sources pointed out that the physical separation of assets could take up to the end of 2010.

22,000 mortgages or 4.3 percent of the total book was in arrears at the end of the year compared to 2.9 percent at the end of the previous year. These are concentrated in the old "together" portfolio which holds 125 percent mortgages and had an arrears rate of seven percent at the end of 2009. One out of every three mortgage customers of Northern Rock is in negative equity.

Meanwhile Lord Turner, chairman of the FSA, announced the risk outlook policy for 2010 and said that they would require banks to continue retaining the lion's share of the profits to bolster their capital. The banks have been told that they must hold tier one capital at four percent even if there is a peak to trough fall in GDP of 8.1 percent by 2014 and a peak in unemployment of 13.3 percent. The stress test for 2009 prescribed a peak to trough fall of 6.9 percent and the actual figure has worked out to 6.2 percent.

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