Connect with us

Hi, what are you looking for?

NewsTimes.co.ukNewsTimes.co.uk

MONEY

Northern Rock’s Bank of England bailout ‘should have been secret’

An agreement to bail out Northern Rock which triggered a run on the bank should have been kept secret, the country’s then top banker claims.

The BBC revealed the Bank of England’s support of the struggling North East bank on 13 September 2007.

The following day thousands of Northern Rock customers led the first run on a British bank since 1866.

Mervyn King, then governor of the Bank of England, said he advised the deal be kept secret to prevent panic.

Mervyn KingMervyn King – who entered the House of Lords as Baron King of Lothbury four years ago – was governor of the Bank of England from 2003 to 2013

He told BBC Inside Out, North East & Cumbria: “My advice was very clear – we should not reveal publicly the fact we were going to lend to Northern Rock.”

A Northern Rock insider told the programme the bank wanted to keep the liquidity support facility secret but was told it was “illegal”.

The then governor – now Baron King of Lothbury – disagreed. He said: “Northern Rock and the Financial Services Authority (FSA) all felt it would be a good idea to reveal it.

“The advice of the lawyers and FSA was [keeping the deal secret] was against a European directive.

“Actually, none of my colleagues in Europe believed that for a minute.”

Advertisement. Scroll to continue reading.

The FSA’s former head, Sir Hector Sands, said it would be “inappropriate” for him to comment.

‘Playing God’

The following year, the Bank of England did make secret loans worth £61.2bn to RBS and HBOS.

The news of the Northern Rock loan was broken by Robert Peston, then the BBC’s business editor on the News at Ten.

The revelation caused many customers to try to withdraw their money and a there was a 30% drop in the value of Northern Rock shares.

Many staff and customers lost thousands of pounds worth of shares in the bank in the ensuing fall and subsequent nationalisation.

Northern Rock was taken over by the government in January 2008 before eventually being sold to Virgin money four years later.

ProtestorsNorthern Rock shareholders claim they should have received compensation when the government took over

Mr Peston, who is now political editor of ITV News, said: “Under the rules, the moment Northern Rock requests emergency help from the Bank of England in that way it has failed.

“That is an event.

“If I had not reported that event I would have been guilty of playing God in an incredibly patronising way.

“I’d have been effectively saying that adults were not capable of understanding the significant information and that would have been an appalling thing for any journalist to do.”

Advertisement. Scroll to continue reading.

Lord King said Mr Peston reported the story in a “very responsible way” and could not be blamed for the consequences.

He also said he would have wanted a “fair deal” for Northern Rock shareholders, which would have seen them get the “residual value” of the shares when the government took over.

Instead, they received nothing as the government concluded the bank was not a going concern, a view upheld by the High Court.

Read more at bbc.co.uk

You May Also Like

UK NEWS

Professing to be the lead in Thai relationship with over 1.5 million enrolled single people, Cupid Media’s ThaiCupid brings the one in every of...

WORLD NEWS

An exclusive article form Orestis Karipis In the 1930’s and 1940’s acid was the weapon of deceived husbands and wives in the Western world...

UK NEWS

Read more about switzerland women here. Swiss ladies and men are not reknown for being the most chatty, outgoing or spontaneous when meeting strangers...

FOOD TIPS

In food, if there is one thing you can say without fear of contradiction, it is this: Britain loves burgers. The UK market is...

Copyright © 2020 NewsTimes.co.uk All Rights Reserved