Northern Rock

Mr E

Hi folks, my dad has money invested in Northern Rock. As mentioned in the news this morning, they got a loan from the Bank of England to help with their liquidity.

What are peoples thoughts on this? Should dad get his money out ASAP?

Their site is absolutely hammered this morning, so a lot of people are worried (and I can't even log in).

silverharp

it will probably blow over but it is a warning not to have all your money in one account

BuffyBot

Yup, I don't think it's in iminent danger of disappearing.

bringitdown

I have a few quid in a savings account what is the worst case scenario, could (and I am sure / hope it won't happen) I loose it if they collapse?

prendy

well the english central bank told people not too panic...i agree with previous poster it'l probably blow over.

bringitdown

http://www.fscs.org.uk

and

http://www.askaboutmoney.com/showthread.php?t=63684

Have me okay with the situation.

tHE vAGGABOND

Also a Northern Rock customer

Was woken up by my mum at 7am to tell me that they had gone bust and I almost **** myself right there in bed (nasty image, sorry!]

Not a chance in hell of logging onto online banking or indeed getting thru to them on the phone? I imagine many of their reported 26k Irish customers are all also trying to log on and ring them at the same time!

A lot of the talk is one of the massive multinationals buying them on the cheap, as their share price is really in the toilet [as of right now, I think its down nigh on 70% from its peak of last year]

okidoki987

Share price down 25% from yesterday.
There is a 0.1% chance of them going to the wall because if they did the
whole banking system in the UK and elsewhere would collapse as would the whole economy, share prices etc.
Interest rates and inflation would soar....end of the world blah blah blah
Reminds me of the saem problem a bank in Ireland had about 15 years ago when a rumour started that it was in trouble, loads of people started to withdraw money causing more problems for it.
The funny thing was it was Government owned whcih meant if they went to the wall so did the whole country.
Only took a word from Finance minister to stop the run and everything went back to normal.

Also a NR depositer but I'm leaving my money there.

legoman

Just heard news that there a queues of people looking to get there money out of Northern Rock branches in England.

bringitdown

Hmmm panic not good! And I can't remember my online details ...

legoman

Reports can't confirm much about what branches are being effect but there is supposedly 100 people outside a branch in the City.

bobzi

It'll be grand the Bank of England wont let the bank go bust. They've probably shut down their online banking to stop people withdrawing all their money and making the situation worse

tHE vAGGABOND

TBH - their online banking backend looks to have plain crashed due to demand, [Think like Ticketmasters backend falls over when popular tickets go onsale]

You get to the second stage of auth [very slowly] and it just times out there.

The phones in their dublin office are plain off the hook

unclebill98

Well according to Sky News, no one can get online to do anything. It will blow over and by people withdrawing there cash is just going to make things worst for the bank. Same with most banks, there share prices have come down, but people don't bail, they just get the chance to buy more shares cheaper!!!

silverharp

NR will have to send out DVD's of its a wonderful life. what's the line - I don't have your money it's in Bills house.......

daveg

We have quite a lot of cash on deposit for our emegration to Oz this year but having read the askaboutmoney thread and the links to BBC/RTE news reports I'm not overly worried.

6digitnumber

I have 20k in there and am worried now! I can't say I know anything about how financial insitutions work but if everyone is scrambling to withdraw (hence the website being crippled under the strain of so many requests) isn't the bank in dire trouble? Could it be that the fact that none of us can log on be down to the fact that NR have sabotaged their own website in order to prevent us all withdrawing? If so that seems a bit sneaky to me, is it really our money at all if they control if and when we get access to it?

BendiBus

6digitnumber wrote:

I have 20k in there and am worried now! I can't say I know anything about how financial insitutions work but if everyone is scrambling to withdraw (hence the website being crippled under the strain of so many requests) isn't the bank in dire trouble?

Even in the very unlikely event of NR collapsing, you are GUARANTEED by the UK Government, via the Financial Services Authority, to get over 90% of your money back.

BuffyBot

6digitnumber wrote:

but if everyone is scrambling to withdraw (hence the website being crippled under the strain of so many requests) isn't the bank in dire trouble?

I suggest you research into exactly what is happening. The reason people are scrambling to withdraw is simply because they haven't researched and are in the financial equivalent of a moral panic.

seamus

BuffyBot wrote:

I suggest you research into exactly what is happening. The reason people are scrambling to withdraw is simply because they haven't researched and are in the financial equivalent of a moral panic.

Yeah, seems to be. The AAM thread would seem to indicate that NR could probably handle a widespread withdrawal of deposit accounts. It would have an impact on share prices and liquidity but it wouldn't be bankruptcy.

A Random Walk

AAM have long since banned most posters who understood what was happening in the financial markets, you're left with the amateurs discussing what to do - don't get misled. If I had more than the limits of FSA deposit protection scheme deposited I would be sitting on the phone now to get my money out. The Bank of England are not going to provide an unlimited bailout.

If you are within the scheme limits, you are protected upto 90% in the worst case scenario. The worst case is unlikely but the risk has increased significantly. Again if it was me and I was within the limits I wouldn't worry about it as I know the chance of loss is slim, but it could take some time for you to receive your compensation should the worst happen.

calsatron

The Northern Rock's last published figures had assets (including loans) at £113bn Vs £24bn on deposit so its impossible that a run would push them into insolvency, they are however having massive problems with liquidity mainly due to the big difference between the London Inter Bank Lending Rate and the Bank of England Base Rate, basically it costs them a lot more to borrow cash short term than there making on lending it out long term, which is sucking all the cash out the business.

Most of their loan book also appears mainstream mortgages with limited exposure to the subprime market via Lehman Brothers. So long term it looks like the majority of £113bn will come good.

The most likely outcome is that if the run continues the Bank of England will come through on the loan offer while NR courts prospective buyers, and I'm sure there'd be a good few waiting with the share price in freefall at the moment.

dudara

Barclay's bank has received temporary loans twice from the Bank of England in recent times if AFAIK. Why is this one so much worse?

calsatron

This is the first case since the mid seventies though that a bank has had to approach the BOE as a "lender of last resort".

It's not unusual for the BOE to lend money to other banks it just doesn't generally happen in a turn up on the doorstep and ask for a few quid to pay the bills type of way though.

The Northern Rock went to the BOE because it couldn't get money from anyone else in the market, due to the rising InterBank rate and a general tightening of lending criteria.

Everyones pulling the horns in at the moment and the NR is seen as a riskier bet than others due to their unusually large loan book.

A Random Walk

Calsatron - I'm assuming you're aware of how bank runs occur? You might want to read up on fractional banking.

Dudara I was asking the same question myself. My understanding is that Barclays tapped the emergency lending facility which is (let's say) 2 steps away from a bank failure. Northern Rock have borrowed from the BOE in its role as lender of last resort, i.e. next step failure. The Barclays lending was done using collateral Barclays would have lodged with the bank.

The BOE have basically bailed out Northern Rock, at least temporarily. There is collateral but potentially of poor quality, which is why the UK treasury was involved as taxpayer money is at risk.

calsatron

The NR are using their mortgage book as collateral against the BOE lending, currently that is viewed as recoverable debt.

Even presuming the run continues I can't see any reason why the BOE would remove the facility, the NR's loanbook is easily strong enough when weighed against the amount of cash on deposit.

Medium to Longterm it seems a takeover of NR is inevitable as the borrowing at interbank and then lending to private customers business model they have is currently unworkable.

Nermal

BuffyBot wrote:

The reason people are scrambling to withdraw is simply because they haven't researched and are in the financial equivalent of a moral panic.

My research indicates that if there's to be panic, you should be the one who panics first...

stepbar

We now have business customers running back to BOI to deposit NR money because we are viewed as safe (true). Thing is now we can match and beat them in terms of interest rate. So win win all round.

NR are prime picking for a takeover, don't be suprised if BOI move for it as a way to further expand into the UK.

dranoel

NR musn't have a public relations company when you see how little information they're giving out - looking at their website you wouldn't even know they're in the middle of a major crisis. How can you believe they are not in serious trouble when they aren't giving out any verifiable information to the contrary. Maybe they just don't have any cash to pay a PR firm.

boa-constrictor

A Random Walk wrote:

AAM have long since banned most posters who understood what was happening in the financial markets

Thats gas - I was banned from AAM for nothing and I couldn't figure it out. That makes sense though, as I work in Financial Services and that was obvious from some posts I put up just before I was banned.

A Random Walk wrote:

If I had more than the limits of FSA deposit protection scheme deposited I would be sitting on the phone now to get my money out. The Bank of England are not going to provide an unlimited bailout.

If you are within the scheme limits, you are protected upto 90% in the worst case scenario. The worst case is unlikely but the risk has increased significantly. Again if it was me and I was within the limits I wouldn't worry about it as I know the chance of loss is slim, but it could take some time for you to receive your compensation should the worst happen.

Brian Cowen was on the News last night stating that Irish depositors money was safe. If he really believes that why doesn't he guarantee it. The reality is that depositors funds are at risk and while a run increases the risk, from an individuals point of view the safe option is to bail out while you can.

The depositers protection scheme is little comfort as it only covers you up to a max of €50k - not great when according to most reports the average deposit by Irish customer is around €120k.

Contrary to what some posters have been saying, the British Govt does not have to bail NR out. The Irish Govt bailed out AIB some years ago but that was only because they had around 40% of the current accounts in the country and there would have been anarchy if they went to the wall.

I'll be very impressed if NR is still operating by next Friday.

kippy

I'll be very impressed if NR is still operating by next Friday.

Next Friday eh?
I reckon they'll be in business long after we've all passed away.
That or the more likely scenario, they'll be bought out in the next 6-18 months.
I wouldnt be too worried if I had my money in there.