The Bank of England has stepped in to provide emergency financial support to Britain's fifth-largest mortgage lender, Northern Rock, the latest institution to fall victim to market turmoil, officials confirmed yesterday.
"The Chancellor of the Exchequer has today authorized the Bank of England to provide a liquidity support facility to Northern Rock," the Bank of England's Treasury and Financial Services Authority said in a statement.
The move comes after Northern Rock struggled to raise money to finance its lending amid money market volatility in the last few months linked to the subprime mortgage sector in the US.
The statement said that the funding would be available "during the current period of turbulence in financial markets" and added that the Bank of England could also step in to help other institutions facing short-term problems.
The amount of the credit extended to Northern Rock was not given.
The lender's chief executive, Adam Applegarth, said that the support "reflected a recognition that Northern Rock is solvent."
The company stressed that it would show profits this year of between £500 million and £540 million (US$1 billion and US$1.1 billion) -- though that would be well below the £647 million expected by the market.
On Thursday, Northern Rock's share price on the London Stock Exchange closed at its lowest level since March 2003, at £6.38.
John McFall, chairman of the parliamentary committee that oversees financial issues, urged the lender's customers to stay calm.
He said Northern Rock's request for funding should be seen as "reassuring, because it means they think the problems are temporary."
The Bank of England injected ?4.4 billion into the financial system amid the ongoing turmoil in credit markets earlier on Thursday.
Last week, it pumped £1.1 billion into money markets in its first intervention since global credit woes emerged early last month.
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