Northern Rock Position _ Do Not Panic

It is splashed all across the news that Northern Rock has received an ‘emergency’ funding loan from the Bank of England.  The Bank of England has also confirmed that NR can borrow more if they need to.  

In response, many of you are withdrawing money from Northern Rock and huge queues are outside their doors.  

Our view

Northern Rock has borrowed from the Bank of England.  So what?  Two months ago they would have been borrowing from the City.  Much in the same way as many other lenders borrow everyday.   It is the City that has changed its position on lending to mortage lenders following problems in the USA with low quality ‘sub-prime’ mortgage lending.  

Many banks such as HSBC have had problems with this.  Did you know that Barclays had an ‘emergency’ funding loan last month?

The problem is that the Bank of England call it an 'emergency loan'.

How safe is my money with Northern Rock?

• Northern Rock are to announce profits of £500,000,000.  
• They have only borrowed for cash flow reasons, i.e.  more money has gone out rather than is coming in for example: they are lending alot out at present.  
• You have the protection of the Investors Compension Scheme.  If a Bank, Building Society, Insurance Company or Financial Adviser goes into liquidation with your money, there is a huge compensation fund.  
• Maximum compensation is £31,700 for a bank of building Society.  This represents 100% of the first £2,000 and 90% of the next £33,000.  
• In short, do not have more than £35,000 invested with any one bank or building society.  

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