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Last Updated: Friday, 14 September 2007, 07:36 GMT 08:36 UK
Northern Rock: Reaction
The Bank of England has agreed to give emergency financial support to the Northern Rock, one of the UK's largest mortgage lenders.

In doing so, it has become the highest profile UK-based victim of the fallout from the global credit crunch, which stemmed from the sub-prime mortgage crisis in the US.

Here is some reaction:

HM TREASURY

The Financial Services Authority judges that Northern Rock is solvent, exceeds its regulatory capital requirement and has a good quality loan book.

The decision to provide a liquidity support facility to Northern Rock reflects the difficulties that it has had in accessing longer term funding and the mortgage securitisation market, on which Northern Rock is particularly reliant.

ALISTAIR DARLING, CHANCELLOR OF THE EXCHEQUER

In order to create a stable banking system, the Bank steps in, it makes facilities available to the Northern Rock, Northern Rock can draw on them when it requires, but it means it can carry on trading, people can use their accounts in the normal way, they carry on making their mortgage payments in the usual way, Northern Rock will be able to carry on its business.

JOHN McFALL, TREASURY SELECT COMMITTEE CHAIRMAN

I don't think customers of Northern Rock should be worried about their current accounts or mortgages.

The fact that the Bank is willing to act as lender of last resort should be reassuring, because it means they think the problems are temporary.

ROBERT PESTON, BBC BUSINESS EDITOR

Although the firm remains profitable, the fact that it has had to go cap in hand to the Bank is the most tangible sign that the crisis in financial markets is spilling over into businesses that touch most of our lives.

PROFESSOR CHARLES GOODHART, FORMER ADVISOR TO THE BANK OF ENGLAND

It's a remarkable example of a relatively small problem in the United States feeding through the financial system in a weird and wonderful way and causing all kinds of markets to seize up.

JUSTIN URQUHART-STEWART, SEVEN INVESTMENT MANAGEMENT

It is a short-term cash flow problem. It is unusual for them to be in this position.

This is the Bank of England saying we support the banking system but do not take this as an indication of us propping up investment banks.

ANGELA KNIGHT, CHIEF EXECUTIVE BRITISH BANKERS' ASSOCIATION

Northern Rock is not a reckless lender. The mortgage lending it does well and it does in a high quality, high calibre way.

If I'm a saver with the Northern Rock or I'm a borrower from the Northern Rock then I can take huge confidence from what has actually happened.

VINCENT CABLE, LIBERAL DEMOCRAT TREASURY SPOKESMAN

This is a very serious development indeed and it was entirely predictable since Northern Rock is one of those banks which has been aggressively increasing its market share by offering mortgages at multiples of income well in excess of prudent levels.

It is important the depositors are protected but the governor of the Bank of England is absolutely right to insist that there should be no bail-out of institutions that have operated foolishly.

YVETTE COOPER, HOUSING MINISTER

The Financial Services Authority today have said that they are very clear that Northern Rock is solvent and has a good loan book.

I think that is very important and I think this is really about the banking system, the Bank of England and the FSA doing their job in response to short term liquidity problems, short term problems in the market.



VIDEO AND AUDIO NEWS
Why Northern Rock sought emergency funding



SEE ALSO
Northern Rock gets bank bail out
13 Sep 07 |  Business
Q&A: Northern Rock crisis
13 Sep 07 |  Business

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