GOLDMAN 555

WoW if they go bustit could be major problems....

Mind youI'm surprised the BBC are coming out with such a negative story.



Northern Rock saw a run on the bank in September

Northern Rock has borrowed almost £23bn in emergency funding from the Bank of England, the latest figures from the central bank indicate.
That is roughly £730 for every UK taxpayer, since the Treasury has pledged to guarantee the money given to the troubled mortgage provider. This marks a rise of £2.2bn from the week ended 31 October. Northern Rock has been in trouble since the global credit crunch hurt its business and led to a run on the bank.

EddScott

Hows that flux capacitor holding out?

Snazy

lol ooh goodie, if they recover, do we get interest on it too lol

(joke)

GOLDMAN 555

That figure can't be right £23 billion

The Snug Rhino

how much did you calculate it to be then?

davegtt

GOLDMAN 555

Just seems like a huge amount of cash to lend thats all

EddScott

60,000,000 X £730 = 4,380,000,000

The population is higher but I've knocked a bit off for the people of leisure.

STi wanna Subaru

iTrader: (1)

Uk Taxpayer You need to take out the kids, brickies, leccies, plumbers etc

lozgti

Still reckon it will be fed to the wolves who will snaffle the best bits.

Seems they have the govrnment by the b*lls too however 'hard' the gov't try and appear.'Sort it by February or you are all in really really big trouble'

Trout

iTrader: (1)

It's OK the money is secured against £23bn worth of 100% home loans.

And the taxpayer is getting a very good rate of interest from NR.

If NR go bust it is not an issue.

It is only an issue if the value of the housing market falls and the market is awash with negative equity. And according to the BBC that will never happen

David Lock

So why are they borrowing more each month? Is this to fund new loans business because the city loan boys won't lend to them? Or do they need liquidity to pay out savers who are pulling out?

So the £23b is secured on client property. Are you suggesting that if they go bust (cease trading) then their customers would need to sell up and repay?

What if no one wants to take them over or asks for BoE to write off the £23b or is this scenario too far fetched?

Just wondering dl

GOLDMAN 555

23 billion. And the total taxpayers exposure is probably around 40 billion, or 3% of the entire UK economy.

When is the UK government going to admit that they've made a serious judgment error by propping the ailing bank up?

Oh hold on where are all Labors voters......ooop nourth



I'll get my coat

Trout

iTrader: (1)

David,

some of the money was to support loan commitments that were in their sales pipeline. Some of it will be to support existing business where the existing credit will have matured and they have been unable to renew at anything less than punitive rates being offered by the BoE.

What has been exposed is standard practice in banks - NRK had less reserves to cope when the going got tough AND their business model was almost entirely based on this type of securitisation.

David Lock

OK, thanks. I am following you so far

But my main point was my questioning your assertion "If NR go bust it is not an issue."

May be I am way off track but if no one wants to take over and absorb the £23b then someone is going to have to evict their mortgage holders or the BoE will have to take over and sort of nationalise that business OR write of all or part of the £23bn.

Trout

iTrader: (1)

....or take the monthly payments and get it paid off like any other lender.

The NR business model is like a broker. They pass credit from a (theoretically) low cost lender and charge the consumer more and so make a profit. Their operational finances relate to the management of this not the lending (well mostly).

If NR go bust then the BoE can wait until the current credit conditions improve or sell the credit line (i.e. lots and lots of mortgages) on to someone else. The real exposure is comparitively small.

The Zohan

works out to some £750.00 approx each - oh, and i'd like mine back in time for christmas please

David Lock

Well if you say so...........

But I guess we'll all find out idc. david

Suresh

AFAIK the BoE loans to NR are secured on the mortgage assets of the bank - which means the tax payer actually has very little risk of loss. But why let the facts get in the way of spreading panic

Trout

iTrader: (1)

If the Scoobynet Book of Crap ever got printed that would definitely be in the top ten

You do make me smile

David Lock

A bit unkind.......

I think 2% was quoted on the news which I took to be 2% of the national gov't annual spend if I understood correctly. A fair old whack of dosh.

==========

Suresh - OK but that could just mean the Old Lady takes over the collateral so the taxpayer effectively takes over the risk, albeit minimal, unless the property market goes **** up in a big way.

dl

Suresh

There is a massive problem with mis-reporting of the real issues here in my view.

There isn't a problem with NR's mortgage portolio in any shape or form - at least not according to their interim statement & accounts. Default rates are lower than the average lender apparently. Loan To Value also looks good. Therefore risk to the tax payer really is tiny.

The BoE / Government bail out of depositors is a lot more costly than any aspect of the 20Bn funding exercise. BoE is charging premium rates and making a lot of money on funding. If the BoE didn't fund NR then a bail out would be inevitable as the Bank would simply run out of cash.

pimmo2000

iTrader: (6)

Can we charge them the same as they charge us ?

Thats £30,000 to pay back each then, over 3 years.

David Lock

Well I must have been a victim of the mis-reporting then

I thought most of the money had been used by NR to repay short term loans which they had used to run/expand their mortgage business.

You seem to be saying that most of the money is used as cash to pay out investment withdrawals. I thought withdrawals had slowed down a lot after the gov't's Guarantee Statement.

Their mortgage business may be fine in theory but only if NR can keep it going by paying back loans. Perhaps I have misunderstood your reply. dl

lozgti

It's what really annoys me.No transparancy.

Anyway.Looks like all the banks around the world are taking huge hits.Serves them all right and I am looking forward to a period of misery for all of this greedy lot.

Another 50 pts off the FTSE first thing this morning.Northern 'rocky' Rock into the £1.60 area

Suresh

You're right, my post wasn't clear. A financial business needs liquidity to survive. If the BoE didn't provide that liquidity then NR would have to be wound up, as it couldn't repay its short-term borrowings. A fire sale of assets probably wouldn't leave enough over to pay depositors, as they don't rank highly in the pecking order.

That's why letting it go to the wall would be a mistake as it might trigger deposit insurance payouts that the taxpayer would have to finance.

Much better for the BoE to fund it and allow it to be sold as a going concern - where the new buyer would be able to draw liquidity from the market itself and not need the BoE. Unfortunately the brand is now virtually worthless, so buying NR isn't that attractive unless the price is low enough. NAV is 180p per share or so I believe.

David Lock

So what happens if no one wants to buy NR and take on the ever increasing debt currently being £23b? dl

Suresh

This isn't debt in a financial markets sense it is short-term funding. I took a look at Barclays interim balance sheet and the total due to banks is some £87Bn. Increasing that by £23Bn or issuing bonds on top of the £118Bn that Barclays already has in issue should not be problematic for the market to absorb - provided the name of the borrower is good. NR's name isn't good anymore so interbank and capital markets are closed to them.


There's always a buyer if the price is right!

Leslie

There must have been a hell of a lot of NL MP's with money in the company!

Les

Suresh

Les you're no doubt a nice bloke, but your political trolling really has to stop

Propping up NR is for the benefit of the financial system and has little risk for the tax payer. Unlike black Wednesday, for example....

Black Wednesday - Wikipedia, the free encyclopedia