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Rock risks 'were not foreseeable' Rock risks 'were not foreseeable'
(10 minutes later)
Top executives of the Northern Rock bank have denied doing anything wrong in the run-up to the bank's recent near-collapse.Top executives of the Northern Rock bank have denied doing anything wrong in the run-up to the bank's recent near-collapse.
The bank's chief executive, Adam Applegarth, told MPs that nothing could have been done to reduce the risks the bank was facing.The bank's chief executive, Adam Applegarth, told MPs that nothing could have been done to reduce the risks the bank was facing.
He also told the Treasury Select Committee that the BBC was partly to blame for last month's run on the bank.He also told the Treasury Select Committee that the BBC was partly to blame for last month's run on the bank.
He blamed it for revealing the Bank of England's emergency loan to the bank.He blamed it for revealing the Bank of England's emergency loan to the bank.
"What severely hammered us was the retail run," said Mr Applegarth."What severely hammered us was the retail run," said Mr Applegarth.
He said the BBC's exclusive report on 13 September, that the bank would need to seek emergency funding from the Bank of England, had scared his customers.He said the BBC's exclusive report on 13 September, that the bank would need to seek emergency funding from the Bank of England, had scared his customers.
"It caused us immense difficulties," he said."It caused us immense difficulties," he said.
He revealed that the bank and the authorities had planned to announce the emergency loan the following Monday, which they hoped would have led to less panic.He revealed that the bank and the authorities had planned to announce the emergency loan the following Monday, which they hoped would have led to less panic.
Nothing wrongNothing wrong
Under questioning from the MPs, Mr Applegarth and other Northern Rock executives refused repeatedly to admit they had done anything wrong, or say how they might have behaved differently.Under questioning from the MPs, Mr Applegarth and other Northern Rock executives refused repeatedly to admit they had done anything wrong, or say how they might have behaved differently.
They explained that they had planned how to cope with certain possible problems, such as a 40% fall in house prices, but had not planned how to respond if its ability to borrow in the financial markets dried up.They explained that they had planned how to cope with certain possible problems, such as a 40% fall in house prices, but had not planned how to respond if its ability to borrow in the financial markets dried up.
"What wasn't stress-tested was the event deemed implausible - of the global markets freezing up overnight," said Mr Applegarth."What wasn't stress-tested was the event deemed implausible - of the global markets freezing up overnight," said Mr Applegarth.
"The rapid and long-lasting closure of the global markets was not stress-tested," he added."The rapid and long-lasting closure of the global markets was not stress-tested," he added.
He said the bank had in fact started in March to slow down its lending.He said the bank had in fact started in March to slow down its lending.
But asked if he could have taken any action to mitigate the fundamental risk of the Northern Rock's business model, he replied, "No."But asked if he could have taken any action to mitigate the fundamental risk of the Northern Rock's business model, he replied, "No."
Wholly unexpectedWholly unexpected
Four senior executives of the Northern Rock are being questioned by members of the committee following the bank's recent near-collapse. Four senior executives of the Northern Rock were questioned by members of the committee following the bank's recent near-collapse.
The Northern Rock business model was a good one Matt Ridley, Northern Rock chairman Northern Rock timeline FSA boss faces MPs King defends bank roleThe Northern Rock business model was a good one Matt Ridley, Northern Rock chairman Northern Rock timeline FSA boss faces MPs King defends bank role
The bank's chairman, Matt Ridley, said it had been hit by "wholly unexpected" events and he defended the way he and his colleagues had been running the bank.The bank's chairman, Matt Ridley, said it had been hit by "wholly unexpected" events and he defended the way he and his colleagues had been running the bank.
"The Northern Rock business model was a good one - [but] that proved unable to cope with an unexpected seizure of the money markets in August," he explained."The Northern Rock business model was a good one - [but] that proved unable to cope with an unexpected seizure of the money markets in August," he explained.
"We were subject to a completely unprecedented and unpredictable closure of the world credit markets," he added."We were subject to a completely unprecedented and unpredictable closure of the world credit markets," he added.
Mr Ridley defended the bank's policy of borrowing large sums of money on the financial markets to lend as mortgages to house buyers.Mr Ridley defended the bank's policy of borrowing large sums of money on the financial markets to lend as mortgages to house buyers.
And he denied an earlier suggestion from the head of the Financial Services Authority that the bank was running an "extreme business model".And he denied an earlier suggestion from the head of the Financial Services Authority that the bank was running an "extreme business model".
Most of the borrowing was long-term - "longer than the average life of mortgages on our books," said Mr Ridley.Most of the borrowing was long-term - "longer than the average life of mortgages on our books," said Mr Ridley.
But Mr Ridley said he would resign if other directors asked him to do so.But Mr Ridley said he would resign if other directors asked him to do so.
Assessing optionsAssessing options
Northern Rock's bid last month for emergency funding resulted in a run on the bank, with thousands of savers queuing to withdraw money totalling more than £2bn - or 8% of the amount of deposits it held.Northern Rock's bid last month for emergency funding resulted in a run on the bank, with thousands of savers queuing to withdraw money totalling more than £2bn - or 8% of the amount of deposits it held.
As a result of the subsequent images of panicking customers outside its branches, the Northern Rock brand has now been irredeemably damaged.As a result of the subsequent images of panicking customers outside its branches, the Northern Rock brand has now been irredeemably damaged.
The bank, whose market value has plunged by more than 60% since the start of the crisis, is now assessing options including a sale, a break-up and closing to new business.The bank, whose market value has plunged by more than 60% since the start of the crisis, is now assessing options including a sale, a break-up and closing to new business.
On Monday, it said it was continuing talks with a number of "potentially interested" suitors, but that discussions were at a very early stage.On Monday, it said it was continuing talks with a number of "potentially interested" suitors, but that discussions were at a very early stage.
Its statement came after a consortium led by Sir Richard Branson's Virgin Group put forward plans to take control of the bank.Its statement came after a consortium led by Sir Richard Branson's Virgin Group put forward plans to take control of the bank.
Mr Ridley confirmed that the Northern Rock had now borrowed £13bn from the Bank of England, but declined to guess how much more it might need.Mr Ridley confirmed that the Northern Rock had now borrowed £13bn from the Bank of England, but declined to guess how much more it might need.