Northern Rock is 'solvent' says statement

London - The British Treasury (Finance Ministry) said Friday that an emergency funding facility granted by the Bank of England to a major mortgage lender was to cover 'short-term liquidity difficulties.' Northern Rock, Britain's fifth-biggest mortgage lender, confirmed earlier that it had agreed emergency funding from the Bank of England after being affected by the recent credit crunch in financial markets. The highly unusual move had been approved by Alistair Darling, the Chancellor of the Exchequer, on the advice of Bank of England governor Mervyn King. In its statement, the Treasury said the funding had also been backed by the city watchdog, the Financial Services Authority (FSA). 'The FSA judges that Northern Rock is solvent, exceeds its regulatory capital requirement and has a good quality loan book,' the Treasury statement said. 'The decision to provide a liquidity support facility to Northern Rock reflects the difficulties that it has had in accessing longer term funding and the mortgage securitization market, on which Northern Rock is particularly reliant.' The statement said the Bank of England, in its role as lender of last resort, is ready to make available facilities in comparable circumstances, where institutions face short-term liquidity difficulties.' However, in a profit warning, Northern Rock said its 2007 profits would be more than 100 million pounds (200 million dollars) lower than expected this year. The Bank of England's support - as a 'lender of last resort' - reflected a recognition that Northern Rock is solvent, chief executive Adam Apllegarth said. But the group, based in Newcastle, north-east Britain, said profits would be between 500 million and 540 million pounds this year, well below the 647 million expected by the market. The company is heavily reliant on wholesale money markets to raise cash for lending. Its borrowing costs have soared in the recent turmoil, as banks fearful of potential losses from increasing defaults on higher risk US mortgages have hiked up the rates at which they lend to each other. © 2007 dpa - Deutsche Presse-Agentur

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frankieSep 14th, 2007 - 22:12:43

Sorry but I think the Northern Rock is the worst ....
the service is horrendous and the only way they stay afloat is to ensnare customers and keep them trapped with huge over the top penalties if they try to change provider etc the customer service is absolutely terrible ruthless and they clearly do not care at all about their customers ,
The service is rubbish and there is total disregard for the rules i really do hope they collapse totally unprofessional organisation cowboys.......
I can't believe they've stayed in business this long ......

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