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| Version 7 | Version 8 |
|---|---|
| Treasury extends Rock guarantees | Treasury extends Rock guarantees |
| (40 minutes later) | |
| The Treasury has extended financial guarantees to Northern Rock at the request of the troubled lender. | The Treasury has extended financial guarantees to Northern Rock at the request of the troubled lender. |
| It has offered to cover any loss by financial institutions which provide money to Northern Rock so the bank can operate normal banking services. | It has offered to cover any loss by financial institutions which provide money to Northern Rock so the bank can operate normal banking services. |
| The Treasury has already guaranteed savers' deposits held at Northern Rock after September saw the UK's first run on a bank in living memory. | The Treasury has already guaranteed savers' deposits held at Northern Rock after September saw the UK's first run on a bank in living memory. |
| The move could be seen as taking the bank a step closer to nationalisation. | The move could be seen as taking the bank a step closer to nationalisation. |
| Taxpayer liability | Taxpayer liability |
| It will also lead to greater financial exposure for taxpayers, who have already lent Northern Rock an estimated £26bn. | It will also lead to greater financial exposure for taxpayers, who have already lent Northern Rock an estimated £26bn. |
| According to Mervyn King, the governor of the Bank of England, the additional guarantees amounts to 30% of the Northern Rock's balance sheet. | According to Mervyn King, the governor of the Bank of England, the additional guarantees amounts to 30% of the Northern Rock's balance sheet. |
| "This was a natural extension to help the company. What is important now is to find a new management to take the bank forward," Mr King said. | "This was a natural extension to help the company. What is important now is to find a new management to take the bank forward," Mr King said. |
| This is not very far in my view from actual nationalisation Robert Peston, BBC Business editor Read Robert's blogKing denies Treasury rift class="" href="/1/hi/business/7149153.stm">Bank lends £10bn at auction | |
| The move could buy time for Northern Rock to find a private bidder willing to take it over. | The move could buy time for Northern Rock to find a private bidder willing to take it over. |
| "What this means is that other financial institutions that have lent money to Northern Rock will now have their loans guaranteed," said BBC business editor Robert Peston. | "What this means is that other financial institutions that have lent money to Northern Rock will now have their loans guaranteed," said BBC business editor Robert Peston. |
| "Plainly Northern Rock feared that there would effectively be a meltdown if that they didn't get this guarantee," he added. | "Plainly Northern Rock feared that there would effectively be a meltdown if that they didn't get this guarantee," he added. |
| "This is not very far in my view from actual nationalisation." | "This is not very far in my view from actual nationalisation." |
| The government would prefer a commercial solution for Northern Rock. | The government would prefer a commercial solution for Northern Rock. |
| £100bn guarantee | £100bn guarantee |
| An auction process has been thrown into doubt recently, though two high-profile suitors remain, including preferred bidder Virgin Group. | An auction process has been thrown into doubt recently, though two high-profile suitors remain, including preferred bidder Virgin Group. |
| The Treasury's announcement means that most of Northern Rock's balance sheet is now covered by government guarantees. | The Treasury's announcement means that most of Northern Rock's balance sheet is now covered by government guarantees. |
| This technically takes the gross exposure of the taxpayer to more than £100bn, the BBC's business editor said. | This technically takes the gross exposure of the taxpayer to more than £100bn, the BBC's business editor said. |
| The Treasury said it would extend its existing agreement to cover the bank's wholesale obligations and borrowings to other financial institutions. | The Treasury said it would extend its existing agreement to cover the bank's wholesale obligations and borrowings to other financial institutions. |
| It said the agreement related to agreements "existing or arising in the future". | It said the agreement related to agreements "existing or arising in the future". |
| Credit crunch | Credit crunch |
| Northern Rock ran into difficulties during the recent credit crunch. | Northern Rock ran into difficulties during the recent credit crunch. |
| Unlike most banks, which rely on savers' deposits to fund mortgages and other loans, Northern Rock borrowed heavily in credit markets. | Unlike most banks, which rely on savers' deposits to fund mortgages and other loans, Northern Rock borrowed heavily in credit markets. |
| But banks become nervous about lending cash to each other amid fears over exposure to the US housing market slump. | But banks become nervous about lending cash to each other amid fears over exposure to the US housing market slump. |
| This forced Northern Rock to seek emergency funding from the Bank of England in September, news which sent some customers rushing to withdraw their savings. | This forced Northern Rock to seek emergency funding from the Bank of England in September, news which sent some customers rushing to withdraw their savings. |