If you know anything about the Premiership, you’d know that Northern Rock sits firmly on the front of Newcastle United jerseys in one of Europe’s finest leagues.
An advertisement on a football (soccer) kit (jersey) typically represents a heavyweight in Europe, an up-and-coming company, or a firmly established global leader.
Northern Rock, one of Britain’s largest mortgage lenders, is no different.
That’s why the lender’s call for emergency funding shocked the nation, and made the credit crunch a hard reality in the UK.
A couple days ago the Governor of the Bank of England wrote in a letter that the Treasury Select Committee would be wiling to provide emergency funds so long as difficulties were a result of “temporary market conditions.”
Subsequently, the £4.4 billion relief fund offered by the Bank of England was sucked up in a less than an hour’s time, with banks chomping at the bit to pick up some much needed liquidity.
It is believed that the British bailout wasn’t as accommodating as the American version, with Northern Rock paying a steep interest rate to take on emergency funds from the Bank of England as a “lender of last resort”.
Last year, Northern Rock increased its share of the UK mortgage market by 8.7% in the second half of 2006 to 9.7% in the first half of 2007. Way to go lads!
It has been noted that though the bank was forced to borrow emergency funds, it was in no danger of going belly up (where have I heard that before…hmm…wait…oh…oh wait…no).
Other high street lenders have also announced interest rate hikes as a result of the mortgage crisis, and it’s all starting to sound a bit like a bad sequel.
Northern Rock is the fifth largest mortgage lender in England, and the largest financial institution in Northeast England (Newcastle).
Northern Rock gets about three-quarters of its funding from wholesale markets, and a quarter from retail deposits.
Britain, welcome to our disaster. Be assured that the tea is still hot.
Update: Scores of Northern Rock depositors queued up outside branches throughout the UK to withdraw money from the ailing lender thanks to growing uncertainty.