Shares in Northern Rock plummet as central bank steps in

14 September 2007

The Bank of England has stepped in to give temporary liquidity support to mortgage lender, Northern Rock.

The decision taken by the central bank is very unusual and only occured after backing from the Treasury and the Financial Services Authority (FSA).

As a result, shares in the lender have been slashed by 24 per cent but customers' money was not in danger.

"I think that anybody who is waking up this morning who is either a saver with Northern Rock or has got a mortgage… can be absolutely confident they have got their money with or they have borrowed from a very sound financial institution," Angela Knight, chief executive of the British Bankers' Association (BBA) told BBC Radio 4's Today Programme.

Northern Rock has fallen victim to the effects of the US sub-prime crisis and is struggling to raise funds, however it is considered to be solvent.

Adam J Applegarth, chief executive of Northern Rock, said: "We are seeing extreme conditions in global liquidity, which have impacted on world markets. As a result, we have taken prudent action to rein back our lending until markets normalise."

The Bank of England said that it would be prepared to make facilities available in other circumstances where other institutions were facing short-term liquidity problems.

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