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| Move to quell Northern Rock fears | Move to quell Northern Rock fears |
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| Mortgage lender Northern Rock says it has not yet had to borrow the money granted by the Bank of England as an emergency lending facility. | Mortgage lender Northern Rock says it has not yet had to borrow the money granted by the Bank of England as an emergency lending facility. |
| Experts reassured customers the bank would not go bust as many queued to withdraw their savings on Friday. | Experts reassured customers the bank would not go bust as many queued to withdraw their savings on Friday. |
| Shares in the group fell by 32% after it emerged it had approached the Bank of England for help. | Shares in the group fell by 32% after it emerged it had approached the Bank of England for help. |
| The bank has struggled to raise money to finance its lending ever since money markets seized up over the summer. | The bank has struggled to raise money to finance its lending ever since money markets seized up over the summer. |
| The Newcastle-based bank, the UK's fifth biggest mortgage lender, warned it could have £150m shaved off its profits due to the money market turmoil. | The Newcastle-based bank, the UK's fifth biggest mortgage lender, warned it could have £150m shaved off its profits due to the money market turmoil. |
| On Friday thousands of customers visited Northern Rock bank branches across the country to withdraw savings, fearful the business could collapse. | On Friday thousands of customers visited Northern Rock bank branches across the country to withdraw savings, fearful the business could collapse. |
| NORTHERN ROCK FACTS Founded in 1965 after merger of Northern Counties Permanent Building Society and Rock Building SocietyHeadquarters in NewcastleBecame a public company in 1997Has 6,400 staffHas 18.9% share of new UK lendingLoans and assets of £113bnDeposits from customers of £24bn Northern Rock's share price What if a bank goes bust? | NORTHERN ROCK FACTS Founded in 1965 after merger of Northern Counties Permanent Building Society and Rock Building SocietyHeadquarters in NewcastleBecame a public company in 1997Has 6,400 staffHas 18.9% share of new UK lendingLoans and assets of £113bnDeposits from customers of £24bn Northern Rock's share price What if a bank goes bust? |
| Several customers showed BBC reporters slips that suggest they withdrew sums of £100,000 and more. | Several customers showed BBC reporters slips that suggest they withdrew sums of £100,000 and more. |
| Reports estimate that savers took £1bn out of their accounts on Friday, but Northern Rock has not confirmed this figure. | Reports estimate that savers took £1bn out of their accounts on Friday, but Northern Rock has not confirmed this figure. |
| Tony Looch, a 68-year-old customer, who queued for nearly two hours at Northern Rock's Moorgate branch in central London, said: "My confidence has been shattered. I would not put a penny into that company again." | Tony Looch, a 68-year-old customer, who queued for nearly two hours at Northern Rock's Moorgate branch in central London, said: "My confidence has been shattered. I would not put a penny into that company again." |
| Another lender outside a branch in Newcastle city centre asked: "If they are short of funds, what happens to our funds?" | Another lender outside a branch in Newcastle city centre asked: "If they are short of funds, what happens to our funds?" |
| But a number of officials and experts tried to reassure the bank's 1.5 million savers their money was safe. | But a number of officials and experts tried to reassure the bank's 1.5 million savers their money was safe. |
| Michael Coogan, of the Council of Mortgage Lenders, said he felt customers had over-reacted. | Michael Coogan, of the Council of Mortgage Lenders, said he felt customers had over-reacted. |
| See what went wrong at Northern Rock | See what went wrong at Northern Rock |
| "Savers, clearly, would react today because of the news, but I think they've reacted - and over-reacted - unnecessarily in terms of the risk to their finances and deposits," he said. | "Savers, clearly, would react today because of the news, but I think they've reacted - and over-reacted - unnecessarily in terms of the risk to their finances and deposits," he said. |
| "The key thing going forward is that this is something which the Bank is taking close interest in - maybe the next thing we're looking for from them is an indication of inflationary pressures, maybe the next interest move will be down, and that will be good news for borrowers in the short term." | "The key thing going forward is that this is something which the Bank is taking close interest in - maybe the next thing we're looking for from them is an indication of inflationary pressures, maybe the next interest move will be down, and that will be good news for borrowers in the short term." |
| Chairman of the Treasury Select Committee, John McFall, said Northern Rock's customers should not panic. | Chairman of the Treasury Select Committee, John McFall, said Northern Rock's customers should not panic. |
| Northern Rock is a sound and safe bank and there is absolutely no reason for either mortgage customers or savers to worry British Bankers' Association Robert Peston's blog Q&A: Northern Rock crisis Treasury statement in full Reaction to the news Lender Paragon's shares hit | Northern Rock is a sound and safe bank and there is absolutely no reason for either mortgage customers or savers to worry British Bankers' Association Robert Peston's blog Q&A: Northern Rock crisis Treasury statement in full Reaction to the news Lender Paragon's shares hit |
| "The banking system in the United Kingdom is strong," he said. | "The banking system in the United Kingdom is strong," he said. |
| "We've had 60 quarters of continued growth, the world economy has grown for the past five years. So it's against a strong background. | "We've had 60 quarters of continued growth, the world economy has grown for the past five years. So it's against a strong background. |
| "Don't let's predicate everything of doom and gloom on one small bank at that particular time. And I think it would serve us all well to stand back a little bit on this issue and give it time." | "Don't let's predicate everything of doom and gloom on one small bank at that particular time. And I think it would serve us all well to stand back a little bit on this issue and give it time." |
| The British Bankers' Association urged worried customers to "calm down". | The British Bankers' Association urged worried customers to "calm down". |
| It said: "Northern Rock is a sound and safe bank and there is absolutely no reason for either mortgage customers or savers to worry." | It said: "Northern Rock is a sound and safe bank and there is absolutely no reason for either mortgage customers or savers to worry." |
| Cash is a 'backstop' | Cash is a 'backstop' |
| Unlike most banks, which get their money from customers making deposits into savings accounts, Northern Rock is built around its mortgage business. | Unlike most banks, which get their money from customers making deposits into savings accounts, Northern Rock is built around its mortgage business. |
| It raises most of the money which it provides for mortgages by borrowing from banks and other financial institutions. | It raises most of the money which it provides for mortgages by borrowing from banks and other financial institutions. |
| Its costs have soared as banks have stopped lending to each other because of fears over potential losses on high-risk US mortgages, creating a credit crunch as liquidity dries up. | Its costs have soared as banks have stopped lending to each other because of fears over potential losses on high-risk US mortgages, creating a credit crunch as liquidity dries up. |
| The decision for the Bank of England to become the "lender of last resort" is extremely rare - and also comes after consultation with the Financial Services Authority (FSA). | The decision for the Bank of England to become the "lender of last resort" is extremely rare - and also comes after consultation with the Financial Services Authority (FSA). |
| It is an unlimited facility, with interest rated at a "penal rate" of more than 1% above Bank base rate. | It is an unlimited facility, with interest rated at a "penal rate" of more than 1% above Bank base rate. |
| Chancellor Alistair Darling said the Bank of England had stepped in "to create a stable banking system". | Chancellor Alistair Darling said the Bank of England had stepped in "to create a stable banking system". |
| He said: "People can use their accounts in the usual way, they can carry on making their mortgage payments in the usual way. Northern Rock will be able to carry on its business." | He said: "People can use their accounts in the usual way, they can carry on making their mortgage payments in the usual way. Northern Rock will be able to carry on its business." |
| Northern Rock chief executive Adam Applegarth, who earned £1.35m in salary and bonuses last year, said the bank was yet to draw on the emergency cash, which he called "a backstop in case we need to use it". | Northern Rock chief executive Adam Applegarth, who earned £1.35m in salary and bonuses last year, said the bank was yet to draw on the emergency cash, which he called "a backstop in case we need to use it". |
| On the assumption that the current conditions remain until the end of 2007, there will clearly be an impact on Northern Rock's 2007 asset growth and, therefore, on profits Northern Rock statement Send us your reaction | On the assumption that the current conditions remain until the end of 2007, there will clearly be an impact on Northern Rock's 2007 asset growth and, therefore, on profits Northern Rock statement Send us your reaction |
| Michael Fallon, a Conservative member of the Treasury Select Committee, said questions needed to be asked about the deal. | Michael Fallon, a Conservative member of the Treasury Select Committee, said questions needed to be asked about the deal. |
| He said: "We're going to be asking the governor of the Bank of England when he appears before the Treasury Select Committee next week, exactly why taxpayers' funds should be used to bail out a building society that appears to have been borrowing rather differently to lots of other building societies and banks." | |
| Other bank shares fell on Friday, with Bradford & Bingley, Alliance & Leicester and HBOS down nearly 8%, 7% and 4% respectively. | Other bank shares fell on Friday, with Bradford & Bingley, Alliance & Leicester and HBOS down nearly 8%, 7% and 4% respectively. |
| House builders were also hit, with companies like Persimmon, Taylor Wimpey, Bovis Homes and Berkeley Group falling around 6% and more. | House builders were also hit, with companies like Persimmon, Taylor Wimpey, Bovis Homes and Berkeley Group falling around 6% and more. |
| The London stockmarket's benchmark index, the FTSE 100, at one point dropped more than 2.2% before recovering during the afternoon. The index closed at 6,289 - a loss of 74 points or 1.17%. | The London stockmarket's benchmark index, the FTSE 100, at one point dropped more than 2.2% before recovering during the afternoon. The index closed at 6,289 - a loss of 74 points or 1.17%. |
| WHAT'S HAPPENING AT NORTHERN ROCK? Mortgage lending Northern Rock lends a large amount for mortgages, and finances this with money from banks and savers Savings Northern Rock receives a relatively small amount of money from saversMoney markets Have stopped lending money to Northern Rock due to the crisis in the US sub-prime mortgage marketBank of England Steps into the breach to give Northern Rock an emergency loan Images: PA, Getty | WHAT'S HAPPENING AT NORTHERN ROCK? Mortgage lending Northern Rock lends a large amount for mortgages, and finances this with money from banks and savers Savings Northern Rock receives a relatively small amount of money from saversMoney markets Have stopped lending money to Northern Rock due to the crisis in the US sub-prime mortgage marketBank of England Steps into the breach to give Northern Rock an emergency loan Images: PA, Getty |
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