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Northern Rock repossessions double but staff could still earn 60% bonuses

23 October 2008 / by Rachel Mason
Nationalised bank Northern Rock is still planning on paying its staff bonuses of up to 60 per cent, and may have to repossess even more homes to fund it, despite Government orders that repossession is a 'last resort'.

Yesterday, the Government set out new rules determining what banks and building societies must do before taking a homeowner to court in a protocol they said will help make repossessions a last resort.

But, in order for staff to get their bonuses, Northern Rock needs to repay its Government loan of £26million on time, and this could mean the bank ends up repossessing far more homes than necessary.

The conditions of the bail-out state that when a quarter of the loan is repaid this year, the bank's 4,000 staff stand to receive 10 per cent of their salary as a bonus plus a further 10 per cent if three quarters of mortgages are paid off next year.

Then, when the loan is cleared completely, they will receive a further 15 per cent and when Northern Rock is returned to the private sector, the staff will get a further 25 per cent bonus; this could see chief executive Gary Hoffman, who already takes home £700,000 a year, take home a bonus of up to £420,000.

Last week, it was reported that despite being bailed out by the taxpayer, Northern Rock repossessed twice as many properties than the industry as a whole – which the CML predicts to be up 137 per cent anyway - in the first half of 2008. By the end of September, the bank has repossessed a total of 4,201 homes, compared to 2,215 in 2007.

Though the bank denies it is taking an 'aggressive' attitude towards repossessions, Northern Rock has been accused of repossessing more homes than necessary in order to reach its loan repayment targets.

Chris Tapp, director of the charity Credit Action, said he is worried about the risks associated by the bonus culture.

"It can incentivise staff to make decisions based on short-term factors that allows them to get their hands on bonuses as quickly as possible, but which aren't necessarily in the best interest of customers," he told the Telegraph.

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