Northern Rock Crisis Article Discussion

bristolleedsfan

SussexResearcher wrote: »

Well put. I am frankly appalled at the ill-informed and downright wrong use of terms like 'bail-out' and 'support' on the quote]

best correct post out of all the NR posts imo :T

however my belief ( may be mistaken) is that additional change of policy has meant that any loans BOE give banks will be at base rate as BOE been critizised for not offering cheap money like other countries federal banks have done.

JWILLIAMS_3

moneytree wrote: »

Hello

I'm new to postings..........am having a deliberation about whether to buy Northern Rock shares, good idea or crazy? All thoughts gratefully received!

Thanks

I also have shares with them,do we buy more or sit tight ???

MarkyMarkD

The issue really isn't as much about the cost of the funds, it's mainly about giving the banks the liquidity they need.

Given that LIBOR is around 1% above BoE base rate, there's not much reason for the BoE to lend at a lower rate than this.

bristolleedsfan

MarkyMarkD wrote: »

The issue really isn't as much about the cost of the funds, it's mainly about giving the banks the liquidity they need.

Given that LIBOR is around 1% above BoE base rate, there's not much reason for the BoE to lend at a lower rate than this.

you are entirely wrong again, BOE had told NR that it would lend at a penal 1% above base rate, other federal banks were flooding their money markets with "cheap money", 1% above base rate was no use to NR at all after all what morgage business was it going to get charging 1%+ above base rate.

perhaps u should check your facts before you post, BOE have done a u-turn should NR borrow from BOE IT WILL BE @ BASE RATE.

http://news.bbc.co.uk/1/hi/business/7000035.stm

"The Bank of England also announced that it would inject £4.4bn into financial markets, offering cheap credit through a so-called emergency tender at a rate of 5.75%, in an effort to shore up crumbling confidence in the UK banking system"

baby_boomer

dunstonh wrote: »

The Govt has yet to give any support to NR

Guaranteeing the depositors of a high risk taking bank isn't support :eek: ?

dunstonh wrote: »

The FSCS is funded by financial services companies not the taxpayer.

That's what I said, if you choose to read it more carefully. But the government has also put taxpayers' money on the line, which is a bad precedent that will affect future behaviour of depositors and bankers.

dunstonh wrote: »

NR was never going under. It was solvent

The OED definition of solvent is actually when you have enough money to meet your liabilities. NR didn't.

dunstonh wrote: »

The BoE offered an overdraft facility should NR need it and if they did, the taxpayer would have done well out of it due to the rate being above LIBOR. You could argue that as NR hasnt drawn on that facility, the taxpayer has lost out.

There seems some confusion above as to whether the rate is LIBOR, above Libor or just the bank base rate (which could land the bank in trouble with the EU Competition Commission)[/quote]

purch

The OED definition of solvent is actually when you have enough money to meet your liabilities. NR didn't

How did they manage to pay out the £ 2 Bill that savers withdrew over the weekend ?

The Govt has yet to give any support to NR

apart from a little verbal support maybe !!!

There seems some confusion above as to whether the rate is LIBOR, above Libor or just the bank base rate

The Emergency Funds would have been provided at 6.75 is 1pc above Base Rate by my reckoning. It was not linked to any particular LIBOR.

Given that LIBOR is around 1% above BoE base rate

Which LIBOR ? There is more than one period that has a set daily LIBOR

Former_MSE_Dan

Hi folks,

As this situations is seemingly constantly changing, I thought i'd let you know that we have just updated our Northern Rock Crisis article to the following with reagrds to the new 100% compensation guarantee - now that all the facts are finally in from The Treasury:


Q: If I’ve savings with Northern Rock what should I do?

A. Don’t panic! While nothing’s impossible, the chances of Northern Rock going bust are still smaller than Accrington Stanley winning the FA cup; the whole point of the original overdraft facility was to allow it access to many billions of extra funds. Yet even if the unthinkable did happen, your savings now have more protection with Northern Rock than any other banks, except Government-backed NS&I accounts.

Normally, you are covered for £31,700 of your first £35,000 with any bank thanks to the official Financial Services Compensation Scheme (FSCS), and this applied for Northern Rock too until this crisis. But after the queues in the streets, The Chancellor of the Exchequer announced on Monday 17 September that 100% of all existing deposits with Northern Rock are totally guaranteed; if it went bust, you’d not lose a penny.

Details have now filtered through that anyone with savings in a Northern Rock account at midnight on 19 September, or anyone who closed an account between September 13 and September 19 and re-opens it in the future, will be guaranteed to get back their whole balance as at September 19, interest that they are owed, and any money deposited in the future, if the bank did have to close

It’s worth noting though, most of Northern Rock’s accounts aren’t best buys, so whilst there’s no need to move your cash, you can get better deals elsewhere. Just don’t withdraw huge wads of cash, that ain’t safe; do a bank transfer instead, see the Top Savings Accounts article. For the moment, all other banks will get just the original FSCS compensation; the first £2,000 saved, and 90% of the next £35,000 (double these figures if it’s a joint account)


Q. Is this Government promise to fully guarantee Northern Rock savings legally binding?

A. No, not yet anyway. Yet the Chancellor, Alastair Darling, has appeared on TV making this guarantee, and other official spokespeople have backed it up. For the Government to not honour this promise, especially after the massive public interest in the story, would frankly be political suicide of the highest magnitude.

So although nothing is set in legal stone yet, my view is that for once, a politician’s word is as a good as his bond; anyone with existing deposits in Northern Rock should have absolutely zero worries about the safety of their cash.

uk_steve

opps wrong post

maypole

Am I right in saying they are only guaranteeing existing customers funds and those that reinvest money taken out in the panic and NOT new investors?

bristolleedsfan

maypole wrote: »

Am I right in saying they are only guaranteeing existing customers funds and those that reinvest money taken out in the panic and NOT new investors?

yip correct, from memory from what ive read only those who have reinvested the funds withdrawn in panic if reinvested within a couple of days, so not to give northern rock an advantage over other savings providers