Bank of England rescues Rock
(18 September 2007 – UK) The Bank of England has granted an emergency lending facility to Northern Rock, Britain’s fifth largest mortgage lender.
Northern Rock relied on funds from the wholesale market for its expansion since converting from a building society to a bank ten years ago.
The money from the wholesale market has now dried up due to a global credit squeeze, which left Northern Rock to call on the central bank of England for funds.
The funding has come after an investigation by the Financial Services Authority (FSA) to confirm that Northern Rock still had a future.
Analysts have said that while Northern Rock is unlikely to collapse, a takeover is likely.
The British Government announced a declaration that all savings would be protected. Alistair Darling, finance minister, said that should it be necessary the Government and the Bank of England would ensure all existing deposits in Northern Rock were protected during the current instability.
The announcement responded to the rapid withdrawal of savings by customers. Northern Rock customers withdrew about STG2 billion (A$4.7 billion) over the counter and online in the first two days after the news spread.
The money from the wholesale market has now dried up due to a global credit squeeze, which left Northern Rock to call on the central bank of England for funds.
The funding has come after an investigation by the Financial Services Authority (FSA) to confirm that Northern Rock still had a future.
Analysts have said that while Northern Rock is unlikely to collapse, a takeover is likely.
The British Government announced a declaration that all savings would be protected. Alistair Darling, finance minister, said that should it be necessary the Government and the Bank of England would ensure all existing deposits in Northern Rock were protected during the current instability.
The announcement responded to the rapid withdrawal of savings by customers. Northern Rock customers withdrew about STG2 billion (A$4.7 billion) over the counter and online in the first two days after the news spread.
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