The last week has seen another £2.2 billion added to Northern Rock’s Bank of England borrowings, taking the total debt to approximately £22.8 billion.
The bank’s shares have continued to fall with no takeover deal yet confirmed, with talks still in the “preliminary stages” according to the mortgage lender. It has recently been revealed that the Newcastle-based group may be broken up and sold by division.
Accounts published by the Bank of England suggest that savers have withdrawn between £7 billion and £8 billion since the run on Northern Rock started in September. The money borrowed was partly used to cover the company’s new mortgage business, while other funds replaced shortfalls in wholesale funding.
However, the remaining borrowings are unaccounted for and are likely to have been removed by concerned savings customers. Although the queues outside the company’s high street branches have subsided, the run appears to have continued.
Despite this, Tim Congdon points out in the Financial Times that the perceived “serious threat to Britain’s finances” is misleading, that the lender “should be able to repay the £21 billion [now £22.8 billion] in due course”. “As things stand, Northern Rock and its customers are in fact making a large contribution to the Bank of England’s profits and, at a further remove, to the Government’s coffers,” he adds.
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