2.7 The Treasury considered the possibility of winding down the company under private or temporary public ownership. The branch network, deposits and a matched book of mortgages would have been sold to another bank, followed by longer term disposals of the remaining assets to repay creditors. If the sale of the deposits and branches proved impossible, the alternative would have been to implement a scheme for rapid repayment of retail and wholesale deposit accounts.
2.8 Northern Rock, however, relied on a manual account closure process, and therefore was not equipped to pay off retail and wholesale deposit accounts quickly. The company estimated in October 2007 that it would have taken up to 10 to 12 weeks to repay depositors with error rates as high as 25 per cent. This estimate assumed staff working at full capacity, branches closed and customers unable to access their accounts on demand. Northern Rock's management therefore favoured developing a new automated process for closing savings accounts, which it estimated would take three months to develop. The Treasury considered it would be difficult to persuade customers not to close their accounts during the three months needed to develop an automated repayment process, if it was widely understood the bank was closing. It judged that such an event could have caused a further run on deposits, with the possibility of contagion spreading to other banks.
2.9 Whether the company secured better prices through a more controlled and longer term series of asset sales under a solvent wind down than under administration would depend on market conditions not deteriorating further. Goldman Sachs estimated that the risk for the taxpayer was not as great as under an insolvent wind down, ranging between breakeven and a loss of £2.5 billion.
2.10 The Treasury ruled out an immediate solvent wind-down on practical grounds. The option was, however, kept open as a possibility at a later stage if a private sector buyer could be found for parts of the business or other options proved fruitless. To be able to react quickly if the company's position deteriorated significantly, the Bank, Ernst & Young and Northern Rock pressed ahead with developing a new automated process for closing accounts, which was completed in January 2008.