Norther Rock is history. They won’t exist after the next week. One can only hope it doesn’t provoke a tsunami that engulfs us all.
Northern Rock will be picked up by some other bank keen to get their hands on the loan book. Shareholders will lose out, but not savers.
For those not in the know - Northern Rock was never in the sub-prime market - all it’s loans are good (certainly better than average in terms of defaults). Most banks borrow short-term to manage liquidity (cash on hand). This interbank borrowing has dried up (because no-one knows where the sub-prime mortgages are), so the Bank of England told Northern Rock that if they could not get cash anywhere else, the BoE would lend the money. The BoE (with better access to information and free from other concerns) believes that Northern Rock is good for the loan. They would not be allowed to bail them out if they didn’t. So far (with a £2billion run) Northern Rock have not drawn on that facility.
Of course, all this would not have happened if Northern Rock had not been required by law to announce the BoE facility :smack:
Si
This is a “credit crunch” isn’t it? (I’m trying to pay attention to all this in the vain hope that one day I may have a mortgage)
I asked my sister to summarise the story from the front page of the Times on Saturday, why is everyone taking their money I asked, because the bank is telling everyone everything’s ok was the reply 