It wasn’t the sort of invitation you’d turn down: 9.30 pm, Bank of England HQ, don’t be late. FT Alphaville understands that the governor, Mervyn King, his two deputies and the 16 non-executive members of the Bank’s Court of Directors convened Thursday night to approve the request by Northern Rock, the UK mortgage lender, for emergency funding. Surely, says FT Alphaville’s Paul Murphy, “this must point to something more toxic that we have yet to learn about”. Rock is not a shock, he notes. The mortgage bank has looked dangerously brittle for weeks, and when a share price falls by 3-5% each day, people talk… We’re assured, however, that Rock is as far as it goes. For now. The convening of the Council was a technical matter, to sanction what is effectively a rescue. “Whether the threat of a run on Rock, and perhaps other overly ambitious mortgage lenders with synthetic balance sheets, will be treated as something technical remains to be seen.” Separately, the FT says the Bank is clearly concerned that, if unchecked, the liquidity crisis at Northern Rock could spread to other financial institutions.

This entry was posted by Gwen Robinson on Friday, September 14th, 2007 at 5:52 and is filed under Capital markets. Tagged with northern rock. Edit this entry.