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Northern Rock

Bob2002

ULTIMATE Member
After watching the initial BBC news report, where they reported the Bank of England involvement in a sensationalist manner (while pretending they weren't doing anything of the sort) I guessed this might happen. I'm still amazed though at the queues of panic stricken people trying to get their money out, even though they must have been told a dozen times or more that Northern Rock is solvent. Don't they know what can happen when there is a run on a bank ?

It just goes to remind me that I live in a country where people buy tabloid newspapers, think MMR produces autism, and mobile phone masts cause cancer ... :confused:
 
Indeed, I'd hate to point out the irony to all those panicking that the most certain way to lose money is to do just what they've been doing, rushing on mass to withdraw when the lender itself isn’t actually in any real trouble.

Sadly this is also a problem with the stock market where the surest way to lose out is to withdraw your investment from an unrelated company every time somebody on the news even so much as hints at the word “recession”.
 
I really wanted a clip of Corporal Jones from Dad's Army saying "Don't panic !!!" but couldn't find one (so Hitchiker's Guide to the Galaxy will have to do). :(

dplk0.jpg

:eek:
 
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I'm glad to see some people are willing to leave their money in Northern Rock.
They make it easier for me to withdraw my heavy investment in various savings accounts with Northern Rock.

Personally I'm not even going to take the slightest risk that they may sooner or later become cash starved (BOE agreement is only short term don't forget - remember these are politicains and their poodles talking here .. would you totally trust them?).

More fool anyone who is willing to leave their investments with Northern Rock rather than transfer it elsewhere while they can - after all, what is the benefit derived by leaving investments with Northern Rock?

I'd advise anyone to play it safe and get their cash out before anything goes seriously wrong. If nothing does go wrong then whats to loose by withdrawing funds other than a little bit of interest.
 
What about those who have mortgages with them places like Northern Rock make the large interest they pay you buy lending money to those buying... If those with the money remove their funds, others with mortgages could end up losing everything.
 
No, people with mortgages are the least at risk as this part of the company would most definately be bought out by someone else. Mortgages are very profitable to companies.
 
As I recall 90% of rougthly the first £30,000 of someones total savings (total of all accounts) is guranteed anyway although it could take some time to get back. It is unlikely that the BOE will allow them to fail. I'm not sure how banks are dealt with, but building socs are closely monitored and usually are "encouraged to merge" with another building soc if their finances are less than 100% sound.

If I had savings with Northern Rock, I'd be tempted to reduce them to the level of the compensation scheme if the situation deteriorates, but I'd also be tempted to watch the share price and take a punt on their shares when I think they'd nearly bottomed out.

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/09/14/bcnnorthcowie114.xml

"the FSCS was set up to provide protection up to £31,700 per person.

That covers 100pc of the first £2,000 of financial loss per person, followed by 90pc of the next £33,000 of financial loss per person"
 
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There is freedom of choice, and people should feel free to deposit their savings with whichever Bank or Building Society they feel comfortable with. I am sure Northern Rock will survive this problem, but investors and depositors should be able to freely chose if they wish to stay or leave without others criticising them for their decisions.
 
Are the public ignorant or thick?

What cheeses me off is that if the small 1-person business has a problem with cash flow due to customers not paying them, then they can go under. However, if you are a bank you can easily borrow money from the Bank of England.

Where's the help for the small business?
 
Are the public ignorant or thick?

What cheeses me off is that if the small 1-person business has a problem with cash flow due to customers not paying them, then they can go under. However, if you are a bank you can easily borrow money from the Bank of England.

Where's the help for the small business?

Richard, i don't agree with the point im about to make but i think its because of this.

A one person small business goes under - it effects a small number of people, a bank goes under and possibly millions of people are effected with possible damage to the UK economy as a whole.
 
As stated NR isnt short of assets, it was just short of hard cash to keep taking on new mortgage customers, if anyone should be panicking it should be Barclay's customers, Barclays went had in cap to the Bank Of England days before NR; and not just to cover a cash shortfall, but because they are heavily involved with the US sub-prime business that has caused the crisis in confidence. (They have lost a $hit load of money and are looking for a rescue package from a Dutch bank).
 
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Something Fishy Going On

Kept a bit quiet about this didn't they:
LLOYDS TSB was asked by Northern Rock to mount an eleventh-hour rescue takeover of the troubled Newcastle-based mortgage lender. The two banks held detailed talks, but the Lloyds deal was ultimately blocked by the Bank of England and the Financial Services Authority.

There were concerns among Bank officials that a takeover would cause greater consternation in financial markets. Once the decision to stop the rescue was made, Northern Rock had no choice but to ask the Bank for an injection of funds.

I wonder what else they are keeping quiet about?
I have very little trust in what those bugg**s in charge of our money tell us.
 
I was going to spend a grand on premium bonds this month. Would it be better invested in Northern Rock, bearing in mind I may shortly have to subsist on my pension?
 
I'm not sure if you're having a joke here Chris.
According to some sources, if the present run on NR continues & it had not already been the subject of a takeover, the bank would effectively be nationalised and put into administration so it could be wound down.

Investing is all about a balancing act of maximising return and minimising risk. NR hardly fits that requirement at the moment.

If you don't fancy Ernie, why consider a different investment company to NR?
 
Capt Cretin, I'm not at all familar with your point about Barclays going cap in hand to the BOE & then seeking a rescue deal from a Dutch bank.

What I do know is that it is Barclays who are seeking to buyout the Dutch investment bankers ABN Ambro for about £40 Billion in shares & cash.
If Barclays can raise that sort of money, it doesn't strike me as an indication Barclays are in deep trouble.

http://www.ft.com/cms/s/0/0dc1c2e4-6320-11dc-b3ad-0000779fd2ac.html
 
Extract from todays ADVFN investment website:
According to a separate report in The Sunday Telegraph, Northern Rock could
be broken up and sold off as early as this week, with other major banks dividing
up its 100 bln stg mortgage portfolio between them.
The paper said that while government officials are discussing a co-ordinated
rescue of Northern Rock involving other banks and the BoE, the lender may launch
a fire-sale of its assets if its share price extends Friday's heavy falls when
markets open tomorrow.
"If the share price falls heavily on Monday, then a fast break-up and sale
of the assets looks inevitable," it quoted an unnamed source close to Northern
Rock as saying.
The report comes as anxious savers continue to withdraw their cash from
Northern Rock, despite assurances on Friday from the BoE and the FSA that the
lender is solvent and well-capitalised.
 
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The Bank of England will only lend money to a viable business they will not support a business that not financially sound .Hence they let the Barings Bank go under a few years back .
 
Kept a bit quiet about this didn't they:

I wonder what else they are keeping quiet about?
I have very little trust in what those bugg**s in charge of our money tell us.

"There were concerns among Bank officials that a takeover would cause greater consternation in financial markets. "

I don't buy that explaination.
 
Mel
In saying you don't buy that explanation, I don't know if you consider the report is incorrect or that the BOE explanation for blocking the takeover is a poor excuse.

If the BOE/FSA genuinely felt it would cause consternation in the market, did they really not realise that opposing a takeover would result in even greater consternation than letting the takeover proceed. And it now seems from reports that possibily the only way forward is for NR is be taken over in any case.

Of course the whole problem is that the public never get to know the whole truth until it's late to do something about it.
 
I've no way of knowing if the report is correct, but assuming it is I don't buy the excuse.

A takeover should have reasured the banks customers and shares were up on rumours of a takeover:- http://news.independent.co.uk/business/analysis_and_features/article2881437.ece

The BoE would presumably have very stringent rules for approving a takeover, perhaps LLoyds couldn't (or wouldn't) meet them. Although this report http://www.forbes.com/markets/feeds/afx/2007/09/16/afx4121749.html suggests LLoyds may have pulled out themselves.

It does sound likely that they'll be taken over or failing that broken up whether the run continues or not.

The item I linked to in an earlier post mentions NR offering loans upto 125% of property value and up to 6x income. If there is a lot of high risk loans like that the value of their lending might have to be written down.


It would be interesting to know how much (if any) of their mortgage business is sold through agents, as lending through agents tends to be much more risky - their only interest is the commission so it is not uncommon for some to encourage borowers to exaggerate income and also pick up customers that have been rejected by major lenders.

I've worked for a build soc that had a run, many of those that were taking their money out had savings below the guarantee threshold, so had the company failed they would have got 100% of their money back (eventually). Being a building soc though ment we had the bizzare situation where other people were queuing to put large sums in on the off-chance they'd qualify for a windfall in the event of a takeover. The main concerns were our system might not cope with the numbers of transactions, and the older people taking their life savings in cash might get robbed.
 
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