British bank hit by credit problems, clients withdraw savings

[icymist]

LONDON : Shares in British bank Northern Rock plunged by a quarter on Friday as clients rushed to withdraw their savings following an emergency bailout of the lender by the Bank of England.

The central bank came to the rescue of Britain's fifth-biggest home loan provider, which is facing severe difficulties raising cash on money markets amid the ongoing global credit squeeze.

From London to Edinburgh, panicking customers queued outside Northern Rock branches to get hold of their savings, despite government ministers and Bank of England (BoE) officials appealing for calm.

"I have withdrawn all my money," said one worried customer who wished to remain anonymous outside a branch in Harrow, north west London.

"I know everyone has been urged not to panic but I just felt safer moving the money somewhere else rather than worrying about Northern Rock's financial position over the next few days," she added.
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The Scotsman:

Northern Rock warns of £100m profits fall
MICHAEL BLACKLEY
BUSINESS REPORTER ([e-mail])
NORTHERN Rock, one of the UK's biggest mortgage lenders, said today its profits for the year would fall more than £100 million lower than expectations as the current financial markets crisis continues to bite.

It also confirmed it needed to obtain emergency funding from the Bank of England and insisted it would not have received the backing if it had not been a solvent company. Its shares took a tumble throughout the morning, dropping by more than 20 per cent.
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Northern Rock calls on emergency support from BoE
NICK BEVENS

NORTHERN Rock has turned to the Bank of England as the "lender of last resort" after difficulties raising cash from the wholesale markets.

The move is expected to spark fresh concerns that the impact of financial market turmoil is having a deeper impact on some banks than previously thought.
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The Guardian:

Northern Rock shares plunge

Larry Elliott and Ashley Seager
Friday September 14, 2007
Guardian Unlimited

Branches of the Northern Rock were besieged by worried investors today as fears grew in the City that the Bank of England rescue package for Britain's fifth biggest mortgage lender could herald a slide in house prices and further financial collapses.

Amid news that property prices were already falling sharply before Threadneedle Street's first use of its lender of last resort facility in more than 30 years, the Newcastle-based Northern Rock was forced to keep branches open late to allow savers to get access to their money.

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Shockwaves ripple through economy


Ashley Seager
Friday September 14, 2007
Guardian Unlimited


The Northern Rock crisis could not have come at a worse time for the British economy or housing market, both of which have already begun to show signs of flagging as a result of the five interest rate rises of the past year.

Economists were busy today scaling back their expectations for economic growth, house prices and interest rates for next year as the shockwaves from Northern Rock ripple out through the economy.

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