Northern Rock borrows £23 billion

Source: Exec Digital UK

Date :02/11/2007 08:46:35

Northern Rock has borrowed almost £23 billion in emergency funding from the Bank of England, the latest figures from the central bank indicate.

The Newcastle-based lender's latest loan was revealed after its shares had another tumultuous day on the stock market, eventually closing down seven percent to 172 pence.

This follows the news that the Bank has borrowed a further £2.2 billion in the past week.

According to the Bank’s balance sheet, the mortgage lender has steadily increased its borrowing since mid-September.

Financial help

The problem facing Northern Rock is that three-quarters of its funding came from wholesale money markets, and when the global credit crunch took hold, its main source of financing dried up, making it almost impossible for Northern Rock to keep operating.

As a result, the lender turned to the Bank of England for emergency funding, prompting the run and its current set of problems.

A number of financial firms including the private investment firm JC Flowers and Sir Richard Branson's Virgin Money have been looking to acquire the Northern Rock but it warned this week that discussions were at an early stage with no certainty that a deal would result.

The lender has hired Blackstone, the private equity firm, to help come up with a plan to resolve its fate which has increased the possibility that the bank might be broken up and sold to more than one bidder.

November 2 2007