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| Version 1 | Version 2 |
|---|---|
| Darling 'blocked' Rock rescue bid | Darling 'blocked' Rock rescue bid |
| (30 minutes later) | |
| The head of the Bank of England has said it was the chancellor who made the final decision not to support a move by Lloyds TSB to take over Northern Rock. | The head of the Bank of England has said it was the chancellor who made the final decision not to support a move by Lloyds TSB to take over Northern Rock. |
| Mervyn King told BBC Radio's File on 4 that he had told Alistair Darling it was "a matter for government". | |
| Mr King said Lloyds TSB had wanted a £30bn loan from the Bank of England at competitive rates as part of the deal. | |
| The collapse of the deal meant that Northern Rock had to go to the Bank of England for emergency funding. | |
| "I said to the chancellor: 'This is not something which a central bank can do'. | |
| "'They don't normally finance takeovers by one company for another, let along to the tune of £30bn, which is rather a large amount of money'." | |
| Northern Rock's need for emergency cash sparked the first run on a UK bank for almost 150 years. | |
| Crisis not over | |
| Mr King said it was likely to be several months before banks return to normal after the crisis because it would take that long for banks to disclose all the losses from financial instruments linked to US sub-prime mortgages. | |
| So far no retail depositor in this country has lost a penny in this episode Mervyn King, Governor of the Bank of England | So far no retail depositor in this country has lost a penny in this episode Mervyn King, Governor of the Bank of England |
| "I think most people expect that we have several more months to get through before the banks have revealed all the losses that have occurred, and have taken measures to finance their obligations that result from that, but we're going in the right direction," he said. | |
| "There is always, in a period like this, the possibility that a shock from outside the UK, one from the world economy, might create further fragilities but to some extent there are always risks, there are always fragilities. | "There is always, in a period like this, the possibility that a shock from outside the UK, one from the world economy, might create further fragilities but to some extent there are always risks, there are always fragilities. |
| "What I would say is that the situation now is in my view different from that in August, though it's not without risk." | "What I would say is that the situation now is in my view different from that in August, though it's not without risk." |
| £30bn rescue bid | £30bn rescue bid |
| Mr King said that in the first few days of the crisis that engulfed Northern Rock, it would have been dishonest to reassure customers that their money was safe. | Mr King said that in the first few days of the crisis that engulfed Northern Rock, it would have been dishonest to reassure customers that their money was safe. |
| He said it was evident from the start that Northern Rock would need £30bn of support, which it was not possible to provide. | He said it was evident from the start that Northern Rock would need £30bn of support, which it was not possible to provide. |
| "In the absence of a government guarantee it was actually rational to queue up and take your money and it would have been dishonest for us to have pretended otherwise," he said. | "In the absence of a government guarantee it was actually rational to queue up and take your money and it would have been dishonest for us to have pretended otherwise," he said. |
| "I thought the chancellor was extraordinarily successful in giving what reassurance he could give. At that point he didn't know how far he could go in giving a government guarantee." | "I thought the chancellor was extraordinarily successful in giving what reassurance he could give. At that point he didn't know how far he could go in giving a government guarantee." |
| There has been criticism that the Bank of England did not intervene earlier by either making it easier for Northern Rock to swap its mortgages for loans or by making more money available to the banking system as a whole. | There has been criticism that the Bank of England did not intervene earlier by either making it easier for Northern Rock to swap its mortgages for loans or by making more money available to the banking system as a whole. |
| But Mr King is adamant that his approach was the right one. | But Mr King is adamant that his approach was the right one. |
| "I think we did feel strongly that it would not be right to bail out imprudent banks - we didn't do that - and we had to take action to protect not the managers not the shareholders but the retail depositors - and so far no retail depositor in this country has lost a penny in this episode." | "I think we did feel strongly that it would not be right to bail out imprudent banks - we didn't do that - and we had to take action to protect not the managers not the shareholders but the retail depositors - and so far no retail depositor in this country has lost a penny in this episode." |
| Hear the full story on Radio 4: File on 4 Tuesday 6 November at 2000 GMT, on Sunday 11 November at 1700 GMT or online at | Hear the full story on Radio 4: File on 4 Tuesday 6 November at 2000 GMT, on Sunday 11 November at 1700 GMT or online at |