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| Rush on Northern Rock continues | |
| (about 2 hours later) | |
| The rush of customers taking money out of Northern Rock continues for a second day, amid concerns over its emergency loan from the Bank of England. | |
| Long queues built up outside branches like Kingston, Surrey, where some 250 people were waiting to take out money. | |
| Experts insist that customers' money is safe, but banking sources suggest that on Friday alone clients pulled out £1bn - or 4-5% of retail deposits. | |
| Northern Rock has struggled since money markets seized up over the summer. | |
| The bank is not short of assets, but they are tied up in loans to home owners. Because of the global credit crunch Northern Rock has found it difficult to borrow the cash to run its day-to-day operations. | |
| Northern Rocks business and capital base themselves have been judged to be sound by the Financial Services Authority. | |
| See what went wrong at Northern Rock | |
| Emergency loan untouched | |
| Northern Rock has not confirmed how much money has been withdrawn from branch savings accounts. | |
| If a mortgage lender goes bust, no-one will come round trying to repossess borrowers' homes to get the money back What if a bank goes bust? | |
| On Saturday, queues outside branches in Sheffield and Golders Green grew so large that police officers had to be deployed for crowd control. | |
| The bank has also yet to learn about the scale of withdrawals from the £9.9bn held in postal accounts. | |
| Meanwhile, numerous internet customers have contacted the BBC News website complaining they have been unable to access their online accounts since Thursday evening, when news of the bank's problems first emerged. | |
| Northern Rock chief executive Adam Applegarth said the bank had yet to draw on the Bank of England's emergency loan, which he called "a backstop in case we need to use it". | |
| Mr Applegarth was the architect of the bank's rapid expansion over the past few years, and earned £1.35m in salary and bonuses last year. | |
| 'Stable banking system' | |
| A number of officials and experts have tried to reassure the bank's 1.5 million savers that their money is safe. | A number of officials and experts have tried to reassure the bank's 1.5 million savers that their money is safe. |
| Chancellor Alistair Darling said the Bank of England had stepped in "to create a stable banking system". | |
| HAVE YOUR SAY This is a temporary liquidity problem, nothing else Geoffrey Pearce, London, United Kingdom Send us your reaction | |
| 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." |
| 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. |
| 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 saver outside a branch in Newcastle city centre asked: "If they are short of funds, what happens to our funds?" | |
| One frustrated online customer told the BBC that this was "a shabby way to treat customers, and will take away what little loyalty I have for Northern Rock". | |
| 'Moral pressure' | |
| 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 class="" href="http://www.bbc.co.uk/blogs/thereporters/robertpeston/2007/09/rock_the_numbers.html">Robert Peston's blog class="" href="/1/hi/business/6994434.stm">Treasury statement in full class="" href="/1/hi/business/6994230.stm">Reaction to the news class="" href="/1/hi/business/6994742.stm"> Lender Paragon's shares hit | |
| It is unclear how much money the Bank of England has offered to lend to Northern Rock. | |
| Any loan has to be backed by the bank's assets, and according to calculations by BBC business editor Robert Peston, Northern Rock can probably draw on about £30bn - which should just about cover all the savings that customers have deposited with the bank - in the "very unlikely case that every single one of its depositors wanted its money back". | |
| He added that endorsements from the Financial Services Authority and the chancellor meant Northern Rock "may well now be one of the safest banks in the world". | |
| "In the unlikely event that a black hole did emerge at Northern Rock, the government would be under enormous moral pressure to pay out 100 pence in the pound to Northern's retail depositors," our business editor said. | |
| Endorsements | |
| The chairman of the Treasury Select Committee, John McFall, said Northern Rock's customers should not panic. | |
| 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 | |
| "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 said: "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 said: "Northern Rock is a sound and safe bank and there is absolutely no reason for either mortgage customers or savers to worry." |
| 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." | |
| Slow-down predicted | Slow-down predicted |
| Shares in Northern Rock fell by 32% on Friday after it emerged it had approached the Bank of England for help. | |
| The bank warned it could have £150m shaved off its profits due to the money market turmoil. | |
| 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 | |
| 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. | |
| 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." |
| 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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