‘Rock may have borrowed £8bn’
Northern Rock may have borrowed nearly £8 billion from the Bank of England in emergency funding, new analysis suggests.
A study of central bank accounts reveals that its “other assets” have risen by £7.75 billion over the past two weeks.
The increase is likely to represent money used to prop up the struggling Newcastle-based lender, experts said.
One report has put the size of the debt at one-third of Northern Rock’s retail deposits at the end of June.
Reviewing the central bank’s latest accounts, Simon Ward, chief economist at New Star Asset Management, noted that its assets rose by a further 3% in the week to Wednesday September 26, on the back of a 13% increase in the previous week.
Taken together, assets have grown by £14.3 billion. Of this £6.5 billion represents increased lending to the money markets.
This leaves around £7.75 billion classified as “other assets” - a category that is likely to include the Bank’s support as lender of last resort to Northern Rock, Mr Ward said.
He added: “It is possible that other undisclosed activities have contributed to the increase, but the latest figures will fuel speculation that the Bank has been forced to extend massive support to the troubled mortgage lender.”
A spokeswoman for the Bank of England said it released its bank return statement every Thursday but would not be drawn on what the figures indicated about the size of the Northern Rock loan.