Northern Rock borrowing increases to £23 billion

by Gill Montia

Story link: Northern Rock borrowing increases to £23 billion

Shares in Northern Rock, the troubled mortgage bank, fell 6.5% on Thursday when it was revealed that the bank’s borrowing had increased to around £23 billion.

Figures from the Bank of England covering the week to the 31st October show a £2.2 billion increase in “other assets”.

Analysts have taken this to indicate that Northern Rock has increased its reliance on the Bank yet again.

According to Simon Ward, chief economist at New Star Asset Management, Northern Rock’s debt with the Bank could reach £30 billion.

In the seven days before the latest loan, Northern Rock borrowed £4.7 billion; this week’s increase of £2.2 billion is the smallest taken up since the run on the bank.

The Chancellor of the Exchequer has urged Northern Rock management to seek an early resolution to the bank’s future but deliberations with potential purchasers remain ongoing.

The difficulties in securing Northern Rock’s future can only be exacerbated by continued fears about the global credit squeeze.

GMAC Financial Services, which is expected to support a bid by Cerberus for Northern Rock, yesterday reported a £775 million loss in the third-quarter, as a result of “dislocation in the mortgage and credit markets”.

The British Bankers’ Association arranged a meeting, which took place yesterday, to discuss the credit crisis.

It was attended by leading banks, the Bank of England, the Financial Services Authority and the Treasury.