Treasury weighs up autumn sale of Northern Rock - papers

The Treasury has told its investment banking advisers to examine the feasibility of selling Northern Rock, the nationalised lender, back to the City in the autumn, The Times has learnt.

A number of senior banking sources said that the Treasury was trying to ascertain whether it should float the state-controlled lender on the stock market, sell the bank to another financial group or remutualise it.

The Treasury's existing external advisers are already considering a range of options to discover which method would lock in the biggest return for the taxpayer on the disposal of the bailed-out bank.

The Government is eager to sell Northern Rock to the private sector at a profit to prove to voters that Gordon Brown has overcome the financial crisis that brought the British banking system within hours of collapse. Full story...

Paul Tucker, deputy governor of the Bank of England and one of Britain's most senior policymakers, said the banking community was holding back recovery in the sector and could threaten the economy as a whole by refusing to lend, reports The Telegraph.

Speaking at an Association of British Insurers conference in London on Tuesday, he described UK bank lending as "subdued" and said that not lending would be a "counterproductive business and financial strategy" which could knock out the roots of recovery when they emerged.

"There cannot sensibly be free riders," he said. "If all banks were to adopt such a strategy, recovery might end up being anaemic at best, which would feed back into the banking system itself - increasing defaults and depleting banks' capital."

Mr Tucker appeared to pour cold water on talk of recovery, describing the outlook for the economy as "highly uncertain", despite a number of positive indicators over recent weeks, notably the business surveys. A Purchasing Managers' Index published last week suggested the dominant services sector grew in May for the first time in almost a year. Full story...

Banks' repaying government funds has been greeted as a sign that Wall Street is edging towards a recovery from its most traumatic financial crisis since the Great Depression of the 1930s, according to The Guardian.

The Obama administration has given the go-ahead for ten of America's biggest banks to repay $68bn (£43bn) in emergency bail-out money after judging that the institutions have recovered sufficient stability to survive without a financial crutch from taxpayers.

JP Morgan, Morgan Stanley and Bank of New York Mellon are among those handing back government money pumped into top Wall Street firms to avert financial collapse at the height of last year's meltdown in the banking industry.

The ability of the banks to return funds has been widely greeted as a sign that Wall Street is edging towards a recovery from its most traumatic financial crisis since the Great Depression of the 1930s. But the US treasury secretary, Timothy Geithner, echoed analysts and industry insiders by warning that the reconstruction of the banking sector is far from complete. Full story...