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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 take the emergency loan granted by the Bank of England. | |
| Experts have said customers' money is safe, but banking sources said about £1bn - about 4-5% of retail deposits - was withdrawn on Friday. | |
| The BBC's Mark Simpson reported about 60 people queuing outside the Sheffield branch just after 0900 BST on Saturday. | |
| 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. |
| Shares in the group fell by 32% after it emerged it had approached the Bank of England for help. | |
| The Newcastle-based bank warned it could have £150m shaved off its profits due to the money market turmoil. | The Newcastle-based bank 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 Q&A: Northern Rock crisis 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 Q&A: Northern Rock crisis What if a bank goes bust? |
| Banking sources said retail customers withdrew about £1bn from Northern Rock accounts on Friday, but Northern Rock has not confirmed this figure. | Banking sources said retail customers withdrew about £1bn from Northern Rock 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 |
| 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." | 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." |
| 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 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 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: "Northern Rock is a sound and safe bank and there is absolutely no reason for either mortgage customers or savers to worry." | The British Bankers' Association: "Northern Rock is a sound and safe bank and there is absolutely no reason for either mortgage customers or savers to worry." |
| Slow-down predicted | Slow-down predicted |
| 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. |
| When you see reassuring comments from Alistair Darling and the various executives in these banks, they are speaking with forked tongues Hugh HendryEclectica Asset Management Send us your reaction 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. | When you see reassuring comments from Alistair Darling and the various executives in these banks, they are speaking with forked tongues Hugh HendryEclectica Asset Management Send us your reaction 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. |
| Hugh Hendry, of hedge fund Eclectica Asset Management, said that the industry had come to realise this year that investors were becoming unwilling to loan such institutions money - which then caused financing difficulties for banks like Northern Rock. | Hugh Hendry, of hedge fund Eclectica Asset Management, said that the industry had come to realise this year that investors were becoming unwilling to loan such institutions money - which then caused financing difficulties for banks like Northern Rock. |
| He told BBC Radio 4's Today programme: "When you see yesterday reassuring comments from [Chancellor] Alistair Darling and from the various executives in these banks, they are speaking with forked tongues. | He told BBC Radio 4's Today programme: "When you see yesterday reassuring comments from [Chancellor] Alistair Darling and from the various executives in these banks, they are speaking with forked tongues. |
| "To me they are saying, 'Hey, listen, we have got great difficulties.' To depositors they are saying, 'No, we don't have difficulties.' | "To me they are saying, 'Hey, listen, we have got great difficulties.' To depositors they are saying, 'No, we don't have difficulties.' |
| "They have to make their minds up - one of those comments is true and one of them is false." | "They have to make their minds up - one of those comments is true and one of them is false." |
| Experts predicted a slow-down in the UK housing market as result of the financial troubles. | Experts predicted a slow-down in the UK housing market as result of the financial troubles. |
| The former head of the Financial Services Authority, Sir Howard Davies, said that mortgages were likely to become more difficult to obtain and costlier. | The former head of the Financial Services Authority, Sir Howard Davies, said that mortgages were likely to become more difficult to obtain and costlier. |
| "I would expect the net of all this to be a depressing effect on the housing market and for house prices at least to stabilise and probably to fall somewhat," he said. | "I would expect the net of all this to be a depressing effect on the housing market and for house prices at least to stabilise and probably to fall somewhat," he said. |
| Oxford University's Professor John Muellbauer predicted falls in house prices in London and the South East. | Oxford University's Professor John Muellbauer predicted falls in house prices in London and the South East. |
| "There is going to be a fallout in the City. The UK is very dependent on the City of London - bonuses and jobs will be cut in the coming year and that's bound to affect prices in London, that tends to spill over into the South East." | "There is going to be a fallout in the City. The UK is very dependent on the City of London - bonuses and jobs will be cut in the coming year and that's bound to affect prices in London, that tends to spill over into the South East." |
| Cash is a 'backstop' | Cash is a 'backstop' |
| 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". |
| 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." | 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 |
| Return to story | Return to story |