LONDON - Leading U.K. mortgage lender Northern Rock has received liquidity support facility from the Bank of England in order to help it tide over the current financial crisis. This emergency fund will help Northern Rock consolidate its position in the market and will also help it in finding a credible solution to its financial problems.
In a statement released this morning, Northern Rock confirmed it had "agreed with the Bank of England that it can raise such amounts of liquidity as may be necessary by either borrowing on a secured basis from the Bank of England or entering into repurchase facilities with the Bank of England".
The bank also added that as such its assets and profits for 2007 will also be affected.
However Northern Rock reiterated that it was solvent and this statement was also confirmed by the FSA, which said the Bank "exceeds its regulatory capital requirement and has a good quality loan book".
Northern Rock has faced difficulties ever since the markets collapsed this summer. The liquidity crunch has meant it has struggled to raise money to fund its lending operations. However the BoE funding does not mean the Bank is going bust.
Angela Knight, chief executive of the British Bankers' Association said as much, "Northern Rock is not a reckless lender... it primarily advances mortgages against good solid houses and the proper regulatory and careful procedures that we have in the UK," she told BBC Radio 4 Today programme.
