Friday 14th September 2007
Chancellor of the Exchequer Alistair Darling has authorised the Bank of England to fund Northern Rock through the current liquidity crisis, it has emerged.
HM Treasury reveals that the decision was based on evidence from the bank and advice from the Financial Services Authority (FSA).
The agreement means Northern Rock is allowed to rely on funds obtained through the Bank of Englands short loan facility in order to secure its long-term liquidity.
However, the Treasury and Northern Rock assert that the survival of the financial institution is not under threat.
"The FSA judges that Northern Rock is solvent, exceeds its regulatory capital requirement and has a good quality loan book," states HM Treasury.
Northern Rock adds that it "has taken action to preserve liquidity and to maintain margins on its current loan book, while modifying its lending approach".
This should ensure that future business undertaken by the firm does not place it in financial difficulty, the lender concludes.
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