Northern Rock approaches BoE...
14 September 2007
One of the UK's largest mortgage lenders has had to ask the Bank of England (BoE)for emergency funding as it struggles to raise money to finance lending.
Northern Rock has built its £113 billion in assets, predominantly in the mortgage sector, by borrowing from banks and financial institutions.
However after a difficult summer the mortgage provider, which was founded in 1965, has recently had difficulty attracting investment.
Despite current uncertainty, the Financial Services Authority has stated that Northern Rock is "solvent, exceeds its regulatory capital requirement, and has a good quality loan book."
The Council of Mortgage lenders has reassured borrowers that the loan arrangements with the Bank of England "do not reflect any underlying business problems", but are more "a reflection of a general lack of confidence in the financial markets".
Commenting on the news, Michael Coogan, CML director general, stated: "Consumers need to understand that the problem for lenders generally at the moment is in raising funds, not in lending quality.
"The Bank of England would not have provided the loan to Northern Rock if it had concerns about the quality of the lender's own business."
He added: "All lenders are facing funding pressure at the moment, and what they need is a return to more normal market conditions as quickly as possible. We welcome the Bank's intervention and confirmation that it is keeping a close eye on the situation."
