Northern Rock seeks emergency help from BoE

[green_cat]

One of the UK's largest mortgage lenders, the Northern Rock, is applying to the Bank of England for emergency financial support, the BBC has learned.

http://news.bbc.co.uk/1/hi/business/6994099.stm

[Kryten]

I just saw this on News 24, quite worrying that its started to hit the UK at this level now, will be in interesting 6-12 months I would say.

[evilsly]

well not even slightly surprising.

Northern Rock were always the most exposed of the mainstream financial players in this country.

they won't be the last to 'wobble'

bubbles are always nasty when they 'pop'

[KennyVader]

Hmm Barclays the other week and now Northern Rock.

Will I get let off my Halifax mortgage if they were to go bye-bye?

[Grandmaster]

Ha, no. The debt would be sold on.

[KennyVader]

Heh heh I knew that really :(

NR shares dropped by 20% this morning.

Can imagine news of the loan is the kind of thing they'd want to keep secret (if they can)

[AdamBrunt]

Hmm Barclays the other week


Wasn't the Barclays one due to a technical glitch the BACS system or something ?

[KennyVader]

I think they said it was their own systems reconciling too late in the day for them to approach other banks and ask for a loan, not a problem with BACS

[AdamBrunt]

I think they said it was their own systems reconciling too late in the day for them to approach other banks and ask for a loan, not a problem with BACS

That was it.

But it was nothing out of ordinary (ie banks borrowing from other banks happens all the time) and just a glitch/delay in their system ... not the same reason as why NR has gone cap in hand to the BoE

[meeti roti]

Will people start taking their money out in panic now

[KennyVader]

Presumably those with savings, yes, they're probably already doing so in Newcastle, all making the situation much worse because the bank doesn't have the ready cash to give them all

[KennyVader]

That was it.

But it was nothing out of ordinary (ie banks borrowing from other banks happens all the time) and just a glitch/delay in their system ... not the same reason as why NR has gone cap in hand to the BoE

Very true

http://news.bbc.co.uk/1/hi/business/6994160.stm says the last time the BofE had to loan in this way was the 1970s

[meeti roti]

What everyone thought on buying the shares with a view to a possible takeover by another bank. After all all those loans mortgages must be worth a few bob.

[Mr Nice]

But it was nothing out of ordinary (ie banks borrowing from other banks happens all the time) and just a glitch/delay in their system ... not the same reason as why NR has gone cap in hand to the BoEYeah, clearing banks have access to an unlimited overnight borrowing from the BoE at baserate+1% (and a finite amount at baserate http://news.bbc.co.uk/1/hi/business/6979933.stm ), but obviously they prefer to borrow from each other at a more favourable rate.

[AdamBrunt]

What everyone thought on buying the shares with a view to a possible takeover by another bank. After all all those loans mortgages must be worth a few bob.

An investment guru on the radio this morning was saying he wouldn't be surprised if a major European bank came in with a takeover bid for NR for that very reason.

[mikegray]

http://news.sky.com/skynews/article/0,,30400-1284080,00.html

[raymondlin]

http://news.sky.com/skynews/article/0,,30400-1284080,00.html

Looks like it's mostly pensioners who are queuing from what i see on the news ?

[Kryten]

Yeah, I think there will be a lot of people panicing for the wrong reasons today, pity really as it will just hurt the bank more!

[douglasb]

Just had a call from the Mrs - apparrently pretty chaotic outside the branch of our local ...

[KennyVader]

http://news.sky.com/skynews/article/0,,30400-1284080,00.html

People in the queue burst out laughing when one staff member asked them: "Does anyone want to pay money in?"

lol. Those wacky geordies. (I am an estranged one so I'm allowed to chuckle at them)

I'm imagining scenes like in It's A Wonderful Life where everyone besieges the Bailey Building and Loan Association.

Can't really blame ordinary folks though. I know somewhere like the Northern Rock is underwritten to an extent by the BofE but I should imagine the process of getting your money if they did go under would be quite drawn out.

edit: another queue pic here: http://news.bbc.co.uk/1/hi/business/6994328.stm

[ic]

I can fully side with the people who are withdrawing their money (I guess most are going for bankers drafts rather than actual cash!). At the end of the day you've saved all your life, the FSCS only guarantees the first £2,000 and then 90% of the next £33,000, so the most you'd get back if they went bust would be £31,700 - which would be pretty naff if you have say £100,000 saved!

[Nebiroth]

Ultimately if a bank did go nust you'd have to go to the Financial Compensation Scheme would you not?

Is Northern Rock a member? I don't know; maybe UK banks have to be a member of the scheme.

I do know that all the banks/building societies I have accounts with are members.

Ack! I should read to the ends of threads.

Yep there are limits on how much you can claim, it;s a good reason for spreading your investments around a bit.

On the other hand, Northern Rock is pretty much uniquely exposed here because of the way it operates, and is the first bank to go to the BoE in decaded. I don't know how much longer it is since then that a bank actually went bust, but it must be a long time.

AFAIk the UK banking system is one of the safest ones around.

[Island Swing]

Queued outside Edinburgh branch also, again it was mostly oldies. Share price down 32% now, ouch! 437p after being at 1250p at the start of the year. Have to say its tempting as surely its gotta be a takeover target (or is it damaged goods now..) Anyone else thinking this?

[meeti roti]

Agree but if someone does come in with a bid surely they will offer the least amount possible.

Only would get interesting if it became an auction.

im staying out of this one but will look at banking sector parts of which look overdone.

anyone got any ideas whose next.

My money on B&B of maybe Halifax

[KennyVader]

Maybe better to wait till Monday and see what the full effect of mass savings withdrawals is, presumably if there are any branches open tomorrow morning they'll be beseiged by people that had to work today! Maybe they will be bankrupt already!

[Baz]

and is the first bank to go to the BoE in decaded.

You must mean weeks not decades. Barclays borrowed £1.6bn just over 2 weeks ago? :shrug:

In fact that article ays its the 14th time it has happened. :lol

http://uk.biz.yahoo.com/31082007/214/barclays-confirms-1-6bn-boe-emergency-loan.html

There queuing outside the York branch aswell. lunacy.

[pjclark1]

This may lead to a sudden increase on mortgage rates.

[meeti roti]

Just remembered i took a PL with NR about 3 months ago. Could they ask me to repay it if things got worse and would the same apply to those folk with mortgages.

No big deal for me but others will be more worried

[Baz]

Just remembered i took a PL with NR about 3 months ago. Could they ask me to repay it if things got worse and would the same apply to those folk with mortgages.

No big deal for me but others will be more worried

No. They cant default on their agreed terms.

[Mr Nice]

In fact that article ays its the 14th time it has happened. :lol

http://uk.biz.yahoo.com/31082007/214/barclays-confirms-1-6bn-boe-emergency-loan.htmlThat's technically different though, that's the standing overnight facility at baserate+1%. The last time the BoE to act as Lender of Last Resort for longer terms was apparently back in the 70's (http://news.bbc.co.uk/1/hi/business/6994160.stm).

[Baz]

But thats only because its so rare that the normal banks wont lend to each other.

[iceking]

Damn, Just paid off my loan yesterday. I take it in the unlikely event of the bank going bust debt would still be reclaimed?

[evilsly]

people who owe money to NR, are the banks primary asset. There's no chance of these being written off in any takeover deal, it's the only reason anyone would purchase it.

[AdamBrunt]

But thats only because its so rare that the normal banks wont lend to each other.

The reasons why Barclays and, now, NR went to the BoE for a 'loan' are completely different ... with the NR case from what I can gather being a far more serious situation.

[evilsly]

although there's speculation that Barclays are by far the most vulnerable of the 'big players', and in a market like this, such speculation could be very very damaging indeed. It's all about sentiment and confidence.

[Baz]

The reasons why Barclays and, now, NR went to the BoE for a 'loan' are completely different ... with the NR case from what I can gather being a far more serious situation.

They wont be the last, if this interbank lending embargo continues. Thing is if they had been able to borrow from anywhere else this would never have hit the press. Its only because the other banks are paranoid that they had to go to the BoE. It really isn't that serious at all.

[Kryten]

Damn, Just paid off my loan yesterday. I take it in the unlikely event of the bank going bust debt would still be reclaimed?

As stated above, there os 0% chance of them going totally bust because loans and mortgages to prime lenders are good assets so they will be sold off no matter what to some other financial institution.

[KennyVader]

Blimey check out the footage of the queues on both Sky News and News 24 this morning!

£1bn withdrawn yesterday.

They have about £24bn of customers' savings so it's about 4% taken out yesterday.

[Nebiroth]

You must mean weeks not decades. Barclays borrowed £1.6bn just over 2 weeks ago? :shrug:

In fact that article ays its the 14th time it has happened. :lol

http://uk.biz.yahoo.com/31082007/214/barclays-confirms-1-6bn-boe-emergency-loan.html

There queuing outside the York branch aswell. lunacy.

But Northern Rock is the first one to use the BoE as Lender of Last Resort.

That is a quite different thing from using the BoE standard overnight lending facility.

AFAIK the Lender of Last Resort thing means that Northern Rock has to be regarded as a good bet by both the BoE and Treasury. It;s not there to bail out anyone who gets in trouble.

But there is no chance that the BoE would permit a major bank to go bust; it would throw petrol onto the fires of the turmoil right now.

Most of this is just caused by self-perpetuating market panic. And the media are really not helping.

[Prufrock]

Seriously considering buying shares in NR now. The bank could well be taken over, but it will never go under. Buying shares now could well be a very good option.

[DVDWotcha]

Maybe better to wait till Monday and see what the full effect of mass savings withdrawals is, presumably if there are any branches open tomorrow morning they'll be beseiged by people that had to work today! Maybe they will be bankrupt already!

Well this is the stupid thing. For people who tend to know a bit about finances and read these forums this isn't really much of an issue. The BoE are going to give them an unlimited overdraft so they are in no immediate danger.

But then you get the numpties (who maybe only read the general forum(hence my thread there)) who just panic and draw their money out. It's them that are actually putting NR in a precarious position.

The real problem is what happens to all the financial markets if a major lender goes bust ? Could be very nasty.

[KRW]

From the looks of the queues on TV (average age 50+ it looks like) I doubt many would be in the general forum either.

[Nebiroth]

The real problem is what happens to all the financial markets if a major lender goes bust ? Could be very nasty.

That's why the BoE and, if necessary, the Treasury would intercede and not allow it to happen.

[Dan]

£1 Billion withdrawn already. :eek:

[Ono]

It's going to be very hard for NR to recover from this as they are very unlikely to get these retail deposits back in the near future. The drop in the share price and the reduction in their balance sheet liquid assets will also affect their Credit Rating which in turn will mean they will have more expensive borrowings in the market.

Not good. I'm sure they won't go bust but jobs are likely to go as the profits of the company are going to drop quite considerably during the next year or two.

[evilsly]

Northern Rock are a dead cert for takeover now

[Ono]

Northern Rock are a dead cert for takeover now

Maybe not. They are a loan driven company and don't really have the diverse business to make them that attractive to many of the large banks.

[DVDWotcha]

That's why the BoE and, if necessary, the Treasury would intercede and not allow it to happen.

But we've already seen other financial sector losses on the share markets. Just on the news of minor financial troubles. It all has a psychological impact on investors and the marketeers even if there is no substance to the issue.

[andybhoy]

Northern Rock are a dead cert for takeover now

Not true. I certainly hope not anyway, as that would be my job up the swanny.

[andybhoy]

£1 Billion withdrawn already. :eek:

That's all guesswork from pundits, and is wrong (so far anyway).

[Nebiroth]

Yes, but there's really nothing the BoE or Treasury can do about those - all they can do is issue assurances that they regard NR's problems as temporary, that it is a viable busniess, and has received the backing of the BoE/Treasury.

There's no way they would allow a major bank to actual go bust, it would be horrendously damaging.

A bank might take over NR - not so much to acquire them as a going business, but to take their existing customers, branches, etc.

It might be attractive to a larger bank which has a much bigger depositor base, which doesn't depend so much on borrowing from other banks or bonds to fund it;s mortgage lending. That's what has caused troubles at NR, they are almost uniquely exposed that way.

I think the next ones in line are Bradford & Bingley and another which I can;t recall, which is why their shares have dropped the most.

Most of the others have much larger assets from their savers.

It is also why interest rates on savings are rising; the banks aren;t loaning each othe rmoney, so they are trying to attract savers to deposit money instead.

Of course, it;s tempting to say "serves them right for giving savers such rubbish rates for years", a lot of them have been barely offering the base rate even on the best accounts.

I always thought that living on top of a massive pile of credit was a precarious place to be though. The whole UK economy appears to have relied on bonkers house prices and credit which is far too cheap and easy, inevitably leading to a huge debt mountain.

It'll end in tears.

[JOV]

I doubt another bank would be able to take over the NR - they are a massive mortgage lender with many billions in assets.

They made their monry by borrowing money from abroad at interest rates lower than ours then offering deals that were below our BOE rate- so we bit theirs hands off.

Now the cheap money has dried up - still alot of assets and mortgae dept that could be sold on.

[Rip Curl]

I always thought that living on top of a massive pile of credit was a precarious place to be though. The whole UK economy appears to have relied on bonkers house prices and credit which is far too cheap and easy, inevitably leading to a huge debt mountain.

It'll end in tears.

Agreed, media is already hyping this as prelude to a recession, NR position plus anything else in the financial market that they can link it to.

[green_cat]

Agreed, media is already hyping this as prelude to a recession, NR position plus anything else in the financial market that they can link it to.

Agree with this. It was astonishing to see the Northern Rock bailout covered on the front page of BBC News at all - let alone as the lead story for several days.

But I've never seen a run on a British high st bank before so perhaps it's hardly surprising that it's generated such interest and fears of much wider consequences.

[green_cat]

That's all guesswork from pundits, and is wrong (so far anyway).

Significantly less or more than £1bn?

[green_cat]

Well this is the stupid thing. For people who tend to know a bit about finances and read these forums this isn't really much of an issue. The BoE are going to give them an unlimited overdraft so they are in no immediate danger.

But then you get the numpties (who maybe only read the general forum(hence my thread there)) who just panic and draw their money out. It's them that are actually putting NR in a precarious position.

The real problem is what happens to all the financial markets if a major lender goes bust ? Could be very nasty.

I think this piece in the Observer sums up the situation to my mind:

The message from on high is that, unlike the money markets which have seized up from panic in the aftermath of the American property and lending crisis, ordinary savers and borrowers should not worry their little heads and stay calm. For savers with less than £2,000, the advice is right - the depositors' compensation scheme will fully reimburse them.But larger savers, whose compensation is limited to 90 per cent of their savings, will see no reason why they should run the risk of losing 10 per cent of their assets.

Nor, if Northern Rock does go bust, why they should go through the uncertainty, worry and hassle of the government organising a takeover to see if their savings will ultimately be protected. The City is not prepared to run that risk, so why should they?

http://observer.guardian.co.uk/comment/story/0,,2170289,00.html

In other words no-one trusts the BoE, the Chancellor, the FSA or the boss of Northern Rock. Frankly I don't blame them.

I'd guess a few of the Northern Rock savers were also with Equitable Life...

[evilsly]

bbc are saying it's close to £2 billion withdrawn now

it's going to be interesting to see what happens with the shareprice on monday, my own suspicion is that we've reached the tipping point with Northern Rock, and it's toast.

[andybhoy]

bbc are saying it's close to £2 billion withdrawn now



You have to understand, that no figures have been released yet and NR themselves don't know yet exactly how much has gone out. They will find out on Monday night/Tuesday morning, when everything is processed.

I have seen interim figures that covered just branches, and some that cover chaps/bacs. Those figures have not yet reached the magic billion yet. However, I do think that by the end of Monday, it will be there or thereabouts (edit: 2 billion, that is). (as those will pick up any branch reconcilliions that didn't make it on Friday).

The man on the bbc website, is pulling the old Fox news trick, of "sources say" "Some say" "we've come to understand", when the figures are simply his and his cohorts own calculations. Some of them are good, some of them are just trying to make things even more dramatic.

My own feeling, having worked on this for the last 3 days, is that there are only three possibilities left.

1) NR will survive, but will never be the same again - new business won't be coming in the door, so they won't need to borrow to finance new business. Highest chance of keeping my job (I'm not highly enough paid to warrant booting, yet skilled just highly enough to be useful).

2) A foreign bank will come in and buy us, and that will at least give me a 50/50 chance of keeping my job, as they would rebrand and keep the head office where it is.

3) UK bank eventually buys us (bear in mind that they cannot buy us while the BOE loan facility is in place - that will need to be removed - and given that both Lloyds and RBS declined to buy us when the BOE refused to put the loan facility in place, means they won't want to buy us now). Barclays are buying a Dutch bank, so will not be interested. HSBC - well, they currently have more in savings than in mortgages, so they might, in a pinch, consider it but I doubt it. Zero chance of me keeping my job beyond 12 months, smallc hance beyond 6 months, medium chance of up to 6 months.

Being in IT, I will go before the other 6000 staff - which at least means I will have a jump on it. However, suffering from an anxiety disroder, means I'll find it hard to find suitable work. If I can find something that pays 2/3rds of what I earn now, I might just keep my flat. (otherwise I can try to sell it, pay the erc, and move "home".

Obviously, I am pretty raw just now - so I won't be able to answer most queries, but can people please think about whether the predictions you make are based on knowledge, experience, educated guesswork or just plain guesswork. Because if everyone makes predictions based on the latter, it isn't fair.

BTW, NR are in the process of announcing a new loyalty rate for savers who don't pull out - figures between 0.75% and 1.5% on top of account rates. Guess I'm going to be doing 60 hour weeks for a while.

[HenryKrinkle]

Do I take it that this really only affects savers with NR...people with NR mortgages have nothing to worry about do they??

[andybhoy]

Do I take it that this really only affects savers with NR...people with NR mortgages have nothing to worry about do they??

Savers only need to worry, if the bank goes bust. While I am not impartial, I don't believe that will or could happen - the BOE simply wouldn't give NR a loan facility if it was going to go bust.

Mortgage payers are the bank's biggest asset and if NR did go bust, or bought out, you'd just pay a new owner instead. I can guarentee that no one is going to get a free house. A new owner wouldn't be allowed to call in a loan, so the home owner won't have to worry that their entire mortgage would need paying at once. (A mortgage is worth more to a bank, the longer period it is paid over - so any new owner will want that to continue).

I just remembered there is a 4th possibility - they could decide to sell the mortgage book off in pieces. This isn't likely and I've no idea what chance I'd have, to keep my job.

A quick check of my finances show I will have 2 to 3 months to find a job, but that doesn't include money from family or money I could raise selling my possessions. 6 months, possibly 9. I don't know whether to think that sounds good or not!

(every month I manage to keep my job at NR, will of course allow me to save about half a month worth of money, so if my job lasts 6 months, I should also be able to last an extra 3 months).

[evilsly]

as much as I fear the worst ( and I have extensive financial services experience, including involvement in a major takeover, so I would consider me a better educated than most guesser), I am hoping that no matter what the outcome is, that it's as painless as possible for Andy and the others who work at NR. It's important to remember that behind the raw numbers being quoted, it's people's lives who are being affected by this.

[andybhoy]

thanks evilsy, I really appreciate it.

[andybhoy]

http://www.moneysavingexpert.com/banking/Northern-Rock-Crisis

Quite frankly, I wish this guy wrote for the bbc instead of rent-a-gob Peston - who makes Fox news look like they have real integrity.

A fantastic article. Unfortunately, the chances of NR not being bought out by another bank are evaporating.

[GlennSh]

Just had an email from MSE telling people not to panic as the chances of going bust are very remote. Its a shame the media havent got anything else to get excited about this weekend, as its them thats driving this :brickwall

Sorry to hear about your involvement andybhoy. Hope things work out :thumbs:

[Bobo Justus]

I was watching those queues this morning and all I could think was "Did you vote yes to get your greedy ******* hands on the £500 when NR was demutilised".

I don't want anyone to lose their money (horrible feeling) but I have no pity for the people that helped destroy building societies.

Another aftertaste of the Conservatives.

[KennyVader]

I was watching those queues this morning and all I could think was "Did you vote yes to get your greedy ******* hands on the £500 when NR was demutilised".

I don't want anyone to lose their money (horrible feeling) but I have no pity for the people that helped destroy building societies.

Another aftertaste of the Conservatives.

And remaining mutual would have saved them ... how exactly, given that it's their business model that's tripped them up?

[AdamBrunt]

http://www.moneysavingexpert.com/banking/Northern-Rock-Crisis

Quite frankly, I wish this guy wrote for the bbc instead of rent-a-gob Peston - who makes Fox news look like they have real integrity.

A fantastic article. Unfortunately, the chances of NR not being bought out by another bank are evaporating.

According to the radio this morning .... they were already possibly going to bought by another bank BEFORE they went to the BoE

[Nebiroth]

I was watching those queues this morning and all I could think was "Did you vote yes to get your greedy ******* hands on the £500 when NR was demutilised".

I don't want anyone to lose their money (horrible feeling) but I have no pity for the people that helped destroy building societies.

Another aftertaste of the Conservatives.

It's got stuff-all to do with demutualisation or "destroying building societies". The same would have happened to a building society in the same position. I can't see your point aside from it being a meaningless poke at the Tories.

If anything, what might be called into question is NR's business model

The demutualised building soceities have operated perfectly well as banks for many years now.

I fail to see how one of them having temporary issues translates into some sort of nefarious plot by Thatcher who obviously spent her days lurking in No.10 thinking up ways to wreck the economy. :doh:

This sort of thing is quite common in Europe - it is just unusual in the UK for a bank to have to go to our central bank. Apparently a Spanish bank did the same last week and no-one batted an eyelid.

Most of NR's woes now stem from panicked customers, egged on by the media going into hype-overdrive.

What could happen is that, finally - and not before time - some sanity might return to the UK regarding house-prices and debt levels.

The housing boom is quite obviously unsustainable. The pric es are absolutely crazy. Planning everything around borrowing based on said crazy price rises is , well, questionable, to say the least.

Unfortunately, it;s been so long since the cold winds of reality have blown here in the UK that people have forgotten what "bad times" really are.

What is needed is a return to "normal times".

[evilsly]

a near 30% drop in share prices this morning too.

sadly it looks like the tipping point has indeed been reached.

the mutual vs demutualised argument is missing one point. A Mutual would almost certainly not have adopted the same business model as NR did, as for a mutual stability is more important than rapid expansion, as there are no shareholders to satisfy.

[stillill]

http://www.moneysavingexpert.com/banking/Northern-Rock-Crisis

Quite frankly, I wish this guy wrote for the bbc instead of rent-a-gob Peston - who makes Fox news look like they have real integrity.

A fantastic article. Unfortunately, the chances of NR not being bought out by another bank are evaporating.

Not sure I'd rush to take as gospel what MSE are saying, though agree it is a little less sensational. He's a personality known more for discount codes and a cheap-flight finder.

The "35,000" protected savings limit he mentions is theoretical - and depends on all the other banks paying into a pot if one bank goes bust (apparently). There isn't currently a stockpile of money for the Financial Services Compensation Scheme to dip into to pay back depositors. Suggesting if NR go bust, the FSCS will just say - "that's alright - here's your money back" - that's isn't likely. It'll take ages (years?) to sort out.

Don't see how this is any more a crisis than the current "cheap credit" boom that gave birth to it. Time for a return to normal as Nebiroth suggests.

[KennyVader]

Media still fuelling the crisis by showing today's queues on TV/websites.

A certain amount of the problem is NR's fault though. A lot of the people on the TV/internet have been saying they're moving their money due to the complete inaccessibility of the NR online banking / telephone banking services. Given that the NR's interest rates are not all that attractive you can't really blame people for wanting out, and to move their money somewhere they can actually work with it; they've nothing to gain by leaving it inaccessible at NR.

NR should have immediately brought on extra capacity on their telephone and online services so that people could see their money was still accessible when they needed it and then there might not be such a rush to get their money moved as there is now. There can be no doubt that NR have seriously misjudged the capacity required on their online and telephone banking services; it was saying "too busy, please try later" at 3am today FFS. I hope other banks and building societies are learning from this and making sure their online/phone services can be quickly upscaled in capacity should a similar crisis befall them.

[Island Swing]

Is that easy to just bring in extra capacity though? :shrug:

Shocking article on BBC though. Article opens with this, rather than a reassurance that its incredibly unlikely.
http://news.bbc.co.uk/1/hi/business/6994746.stm

Are savings at risk?

Anyone with money in a savings account with the Northern Rock - or indeed any other bank - needs to realise that some of their money is always at risk, if they are saving more than £2,000.

Personally I'm waiting for a small upswing in the share price as a sign of a white knight arriving... :nuts:

[KennyVader]

Is that easy to just bring in extra capacity though? :shrug:

It is if you plan for it, things like Burst Hosting etc. Obviously more difficult to ramp up the online banking site, but today you cannot even get beyond the first page of their ordinary static web site let alone the online banking one - upscaling the static site should have been easy, they've had about four days to do it now. This is why I'm saying I hope other banks/building societies are learning from the incident and getting a decent online plan in place pronto.

Personally I'm waiting for a small upswing in the share price as a sign of a white knight arriving... :nuts:

Looking at the charts (http://uk.finance.yahoo.com/q/bc?s=NRK.L&t=5d) it looks like there were an awful lot of sell trades first thing this morning followed by gradual buy ups presumably from speculators ... ?

[Island Swing]

It is if you plan for it, things like Burst Hosting etc. Obviously more difficult to ramp up the online banking site, but today you cannot even get beyond the first page of their ordinary static web site let alone the online banking one - upscaling the static site should have been easy, they've had about four days to do it now. This is why I'm saying I hope other banks/building societies are learning from the incident and getting a decent online plan in place pronto.?

Cheers wasnt sure how these things work.

Looking at the charts (http://uk.finance.yahoo.com/q/bc?s=NRK.L&t=5d) it looks like there were an awful lot of sell trades first thing this morning followed by gradual buy ups presumably from speculators ... ?

Balls of steel to buy today :nuts: but I see what you mean. there was that rise after the initial fall. Still too early IMO. FT are reporting if no buyers do come forward and the business gets would down it could be worth 180p.

[stillill]

Listening to Radio 2 - some 300 people at the branch in Golders Green.
Though one woman they're talking to says she's leaving her money in, but the "scare mongering" has caused her mum to take all her money out.

[puddleduck]

The trouble is, with the share price down 30% today, if investors have no confidence, you can't blame savers for wanting out - especially when you can get better interest rates elsewhere.

One my relatives is trying to get her inheritance out, but the web site has been inaccessible for 3 days.

[evilsly]

it's more than just about Northern Rock now though, there's been a massive shift in sentiment.

Banks and Builders are being hammered on the stock market today. Those people who've had the panglossian idea that property can only ever go up, are in for a nasty shock when this all settles down.

[stillill]

A lot of misinformation is out there at the moment, no wonder people are panicking. Darling, where are you to reassure the public with fiscal facts? Don't flannel about Tory this or 15% that...

[dvds2000]

I don't understand why people shouldn't panic, and why people are critical of people moving their money away. Yes I can see how it certainly isn't helping the bank, but being honest if I had £50000+ in an account with them, helping the bank wouldn't be my first choice either.
I agree, from everything I have read and heard, it's very unlikely the bank would go under, but if theres a chance of it happening, I wouldn't risk any of my savings & I would be down there getting my money out too.
Selfish, maybe, correct decision, I think so. If my £50k was in there I certainly couldn't afford to lose £20k of it if they do go under. All the people saying you shouldn't withdraw it, how many actually have a substantial amount of money in a savings account with them?

[KennyVader]

Cheers wasnt sure how these things work.



Balls of steel to buy today :nuts: but I see what you mean. there was that rise after the initial fall. Still too early IMO. FT are reporting if no buyers do come forward and the business gets would down it could be worth 180p.

Still dropping, any second now it's going to cross the "40% down on opening price" mark, if it hasn't in the time it's taken me to type this

edit: yup, 40% now wiped off today ... lots of lunchtime sell sell sell going on.

Can it get to 50% down in one day!!!?!?!

Adam Applegarth must be preparing his sword ready to fall on it.

41% now.

[Bobo Justus]

If they were a building society they'd of concentrated on their customers and they wouldn't need to go around buying up **** loans and all sorts of other dodgy stuff. All banks are dodgy that's how they make their money. The NR was never a bank but an organisation with still a building society mentality (but just the bad bits). They've just gotten too big for their boots unlike banks who've been dodgy for centuries.

I was in the <s>Halifax</s> errr.. <s>HBOS</s> errr <s>Halifax-Bank of Scotland</s>, ehh... Bank of Scotland this morning. Barely a mention of the Halifax after all the renames. I'm happy with the BOS cos I know they'd kill to keep open. The NR is run by a bunch of ******* amateurs. Obviously.

[pjclark1]

It might be an interesting experiment if everyone in the country took all their money out of all savings accounts in the UK.

Financial revolution anyone?

[DVDWotcha]

And remaining mutual would have saved them ... how exactly, given that it's their business model that's tripped them up?

The basic premise of a mutual is to run the business for the benefit of the customers not shareholders. It would have been a much more stable setup and interest rates could have been higher for savers as there would be no shareholders or other loans to pay.

The other major aspect is the public panic factor. How many people are cashing out simply due to the share price drop ? "Oh-noes, the shares are crashing they must be going down the plug hole, better take my cash out". That would not have happened as a mutual. No share price.

[KennyVader]

The basic premise of a mutual is to run the business for the benefit of the customers not shareholders. It would have been a much more stable setup and interest rates could have been higher for savers as there would be no shareholders or other loans to pay.

The other major aspect is the public panic factor. How many people are cashing out simply due to the share price drop ? "Oh-noes, the shares are crashing they must be going down the plug hole, better take my cash out". That would not have happened as a mutual. No share price.

But their whole business model has been to borrow cheap money from the US to finance all the mortgages they offered here in the UK. To do the "no loans to pay" that you mention then that implies no borrowing from the US or other world markets, so they could not have grown to anything like the size they are now. As soon as they loaned out say 50% of their savings customers' money to mortgage buyers, they would have had to stop doing mortgages. And then if something had gone wrong, and all savings customers had suddenly wanted all their money back, they'd have had to start foreclosing on mortgage customers' properties through no fault of those mortgage customers. I don't see how you can compare mutual and non-mutual, they would be a totally different business, true they wouldn't be in the position they are in today, but then they'd also still be a small fry association with a few branches around Newcastle and Sunderland. So what's the point in the comparison.

[pjalsta]

Some pundit on Radio 4's You and Yours suggested that shares in NR could
end up being worth zero!
It was a throw-away comment rather than an analysis - but I did wonder
how he could justify it. After all, NR must have billions of assets (although
some of them may not be of the highest quality).

Anyway, I was cursing because I wasn't able to buy any shares on Friday.
Now I'm glad I didn't - it's not worth the risk.

[AdamBrunt]

I was in the <s>Halifax</s> errr.. <s>HBOS</s> errr <s>Halifax-Bank of Scotland</s>, ehh... Bank of Scotland this morning. Barely a mention of the Halifax after all the renames.


Odd ?? "Halifax" is mentioned all over the latest communication I had from them last week regarding the mortgage.

[AdamBrunt]

Darling, where are you to reassure the public with fiscal facts? Don't flannel about Tory this or 15% that...

Why is it a government minister's job to comment on how a private sector company are handling their business and what the outcome will be :shrug:

[evilsly]

Odd ?? "Halifax" is mentioned all over the latest communication I had from them last week regarding the mortgage.

I think the official 'change' over happens at some point in this month, possibly even this week.

[stillill]

Why is it a government minister's job to comment on how a private sector company are handling their business and what the outcome will be :shrug:

Because he's already making it worse say "Don't panic - it's the Tories that started it". Some solid response to this is required, no?

And it surely become a Govt issue when the taxpayer (via the BoE) is footing the bill for NR's unsustainable business methods? Or is that someone else's money?

[Nebiroth]

It would have been a much more stable setup and interest rates could have been higher for savers as there would be no shareholders or other loans to pay.

I must say that I found very little evidence to suggest that mutuals offer better interest rates than societies that have turned into banks. Quite the contrary in fact.

The mutuals have suffered from the fact that Britain in the 21st century isn't a nation of prudent savers anymore, but is instead a load of profligate borrowers.

Incidentally, as regard the Financial Compensation Scheme - AfAIK is a bank is authorised to operate in the UK by the Financial Services Authority then it is legally obliged to contribute to the FSCS, and charges are levied automatically, depending on the structure of the bank's business; different sections of the business mean different levies because each has it's own limits of compensation. For example, investments or deposits.

[Dick Long]

I don't understand why people shouldn't panic, and why people are critical of people moving their money away. Yes I can see how it certainly isn't helping the bank, but being honest if I had £50000+ in an account with them, helping the bank wouldn't be my first choice either.
I agree, from everything I have read and heard, it's very unlikely the bank would go under, but if theres a chance of it happening, I wouldn't risk any of my savings & I would be down there getting my money out too.
Selfish, maybe, correct decision, I think so. If my £50k was in there I certainly couldn't afford to lose £20k of it if they do go under. All the people saying you shouldn't withdraw it, how many actually have a substantial amount of money in a savings account with them?

I agree with this view. As can been seen from the pictures of the queues, the majority seem to be elderly people - probably attracted by the NR 'Silver Savers' accounts. For these folks it could literally be their life savings and all the money they're ever likely to have other than pensions (which for most are pretty low).

If you were in that position and you still had the opportunity to retrieve your money and move it elsewhere what would you do :shrug:

[AdamBrunt]

I agree with this view. As can been seen from the pictures of the queues, the majority seem to be elderly people - probably attracted by the NR 'Silver Savers' accounts. For these folks it could literally be their life savings and all the money they're ever likely to have other than pensions (which for most are pretty low).

If you were in that position and you still had the opportunity to retrieve your money and move it elsewhere what would you do :shrug:

Agree with that.

[KRW]

I agree with this view. As can been seen from the pictures of the queues, the majority seem to be elderly people - probably attracted by the NR 'Silver Savers' accounts. For these folks it could literally be their life savings and all the money they're ever likely to have other than pensions (which for most are pretty low).

If you were in that position and you still had the opportunity to retrieve your money and move it elsewhere what would you do :shrug:

Agree with that, and I really can't blame anyone for not trusting the people at the top. Also, a lot i've seen interviewed had a bad experience with Equitable Life - so I cant blame them for not wanting to be stung twice.

[Radiohead]

Here's Reading at lunchtime today.....the entrance is just to the left of the Confetti shop

http://www.guycollier.net/images/nr1.jpg

http://www.guycollier.net/images/nr2.jpg

[Nebiroth]

Sad thing is that a lot of people are probably paying fairly hefty penalty fees for withdrawing their savings out of notice accounts...unecessarily.

Also, what are they going to do with the money? Keep it under the mattress?

However, it does make sense to spread investments around, which is what I've done, not put all your eggs in one basket.

A good place to put some of it is in NS&I, because for that to go under would require the Uk Treasury to go bust!

[KennyVader]

I like how the old man/woman/whatever has brought a chair with them

In fact there are several foldy chairs on show.

Share price has recovered a bit this afternoon, only 34% down on opening now. I expect tonight's news footage of queues will make it drop tomorrow though.

[Daneel]

I've bought some shares, risky of course, but I can see them improving significantly if there is even a hint of a new buyer. Plus, hopefully those that have decided to take their cash out have done so by now and things will start to calm down.

I need to take a closer look at the balance sheet, but I'm also pretty sure that if you divide net assets by number of shares, there is significantly more value in the company than the current share price (£2.90) indicates.

[Geoggy]

if they go bust will i still have to repay my unsecured personal loan?

[Daneel]

if they go bust will i still have to repay my unsecured personal loan?

Yes

[Geoggy]

Yes

say a bit more....................

[KRW]

if they go bust will i still have to repay my unsecured personal loan?

Someone will buy the debts out, you can be sure of that.

[evilsly]

what will happen is your debt will be sold on, and you will have to repay the money to another company, under the original terms and conditions.

[stillill]

Stock market seems to think the Alliance and Leicester might be next for a bit of a run. Shares currently down 30%. Could be a couple of highstreet banks in the doodoo going to the BoE for a bit of a helping handout.

http://uk.finance.yahoo.com/q/bc?s=AL.L&t=1d

[andybhoy]

Another hard day at work today - I ended up being sent home just after 3 as I was wrecked after working the weekend and getting in before 6am today.

I am convimced now that we'll be bought out and the only hope I've got is a foreign bank.

[KennyVader]

Stock market seems to think the Alliance and Leicester might be next for a bit of a run. Shares currently down 30%. Could be a couple of highstreet banks in the doodoo going to the BoE for a bit of a helping handout.

http://uk.finance.yahoo.com/q/bc?s=AL.L&t=1d

From my deallings with A+L they are supremely incompetent and then hopeless at customer service followup, so it wouldn't surprise me or displease me all that much.

When I had a NR account they were fine, just that their rates dropped so I left years ago.

[stillill]

chin up Andy, might be the best thing ever - fresh start and all that.

What's changed that you think there's going to be a buy out? Shares had dropped nearly 50% since Feb, even before the "BoE loan".

[Bobo Justus]

Been speaking to a mate who works in banking and he said HSBC are sniffing around but banks will wait until the last minute cos they don't want the name (NR) and they're not particular about old fogey nervouse savers. They want the debt (mortgages).

The whole thing stinks and makes me feel rather sad.

[andybhoy]

chin up Andy, might be the best thing ever - fresh start and all that.

What's changed that you think there's going to be a buy out? Shares had dropped nearly 50% since Feb, even before the "BoE loan".

This was my fresh start....

I was on a career track that would have seen me on 30k in the next few years and 40k in the few after that. I'll never see that again - especially as I am tied to Newcastle now, and if we're taken over will join a lot of other unemployed people looking for the same few jobs. At least before I bought my flat. I could chase jobs all over the country.

Maybe I will consider selling my flat and taking a big hit on the ERC, just to make it possible to move away.

What's changed is the media gearing up and moving in for the kill - **** holes like Peston have been driving the panic with self referential articles and fga packet calculations designed to make people think that the bank is going under this week.

If the shares go under £2, other banks will be very tempted to buy - given the high quality of the mortgage book (for a start they have half the industry average of people 3 or more months behind on their payments).

I just hope it's a foreign bank.

[raymondlin]

It might be an interesting experiment if everyone in the country took all their money out of all savings accounts in the UK.

Financial revolution anyone?

There won't be enough cash to go around, people who withdraw money are done in cheques or just transfer to another account, not physically walking out with 50k in their handbag.

[andybhoy]

Been speaking to a mate who works in banking and he said HSBC are sniffing around but banks will wait until the last minute cos they don't want the name (NR) and they're not particular about old fogey nervouse savers. They want the debt (mortgages).

The whole thing stinks and makes me feel rather sad.

Exactly - why buy NR when their share price is not rock bottom yet.

[andybhoy]

It might be an interesting experiment if everyone in the country took all their money out of all savings accounts in the UK.

Financial revolution anyone?

Criminals would love that - one whiff that millions have their savings under the mattress and we'd be looking at burglary as the most common crime int he country.

[Radiohead]

This was my fresh start....

I was on a career track that would have seen me on 30k in the next few years and 40k in the few after that. I'll never see that again - especially as I am tied to Newcastle now, and if we're taken over will join a lot of other unemployed people looking for the same few jobs. At least before I bought my flat. I could chase jobs all over the country.

Maybe I will consider selling my flat and taking a big hit on the ERC, just to make it possible to move away.

What's changed is the media gearing up and moving in for the kill - **** holes like Peston have been driving the panic with self referential articles and fga packet calculations designed to make people think that the bank is going under this week.

If the shares go under £2, other banks will be very tempted to buy - given the high quality of the mortgage book (for a start they have half the industry average of people 3 or more months behind on their payments).

I just hope it's a foreign bank.

FWIW I feel for you. As usual it's the ordinary Joe who pays when this happens. The company I worked for in 2000-2002 went under, 1500 of us were shown the door and the CEO walked away with £4.5m and now heads up a massive outfit with a bonus of £15m likely next year.

[andybhoy]

FWIW I feel for you. As usual it's the ordinary Joe who pays when this happens. The company I worked for in 2000-2002 went under, 1500 of us were shown the door and the CEO walked away with £4.5m and now heads up a massive outfit with a bonus of £15m likely next year.

It's all wrong. :(

Applegarth just got his bonus. Every day he earns twice what I earn in a year.

How did you cope with being made redundant (if you don't mind me asking).

[Radiohead]

It's all wrong. :(

Applegarth just got his bonus. Every day he earns twice what I earn in a year.

How did you cope with being made redundant (if you don't mind me asking).

My wife was 5 months pregnant and it was 10 days before Xmas, so I panicked initially whilst I showed her a brave face. I was making contingency plans about selling up if need be though.

Luckily enough I did manage to get another, better, job and ended up ok. It's pretty grim but remember - you're articulate, literate, employable. Don't lose faith in yourself.

[andybhoy]

but remember - you're articulate, literate, employable. Don't lose faith in yourself.

Bloody hell, first Nicola thinks I'm a nurse, and then you think I'm employable! :eek:

:lol:

Might as well laugh :lol:

I'm wondering if I could afford to keep the flat but switch it to a BTL mortgage and then leave it while I work elsewhere. Would need a good job though.

cheers mate - sounds like you came through it well :thumbs:

[evilsly]

The government's announcement that it will guarantee the savings of everyone at NR, is sadly likely to be the final nail in the coffin of NR as it currently exists. All this has done is reinforce the impression with investors that NR cannot stand on it's own two feet (metaphorically obviously), and for savers it has now introduced the notion that their savings might NEED protecting.

NR's chances of getting significant new business in the coming financial year must be close to nil now.

[danielsesay]

andybhoy, I hope things work out for you. I was made redundant almost 12 months ago now and I'm much better off for it now. Better job and better money. The same happened to my mum.

Things will work out for you in the end. Trust me. :)

[Bobo Justus]

The government's announcement that it will guarantee the savings of everyone at NR
I don't actually think they said that and when pressed to comment specifically they did not say that and say they did not.

They have said the bank has money and that will be guranteed but if the bank went bust then the banking law would (and would have to) take over. That's not gonna happen from what I've seen.

[Radiohead]

http://news.bbc.co.uk/1/hi/business/6999615.stm

How many banks will suffer a run, and will they (us) guarantee every one then?

[KRW]

What worries me, is presumably the Bank of England were offering their funds to banks as a lifeline if they needed it, right? Now, what bank in their right mind is going to approach them for that lifeline, should they need it, after this debacle?

[njc]

Will Alistair Darling potentially use taxpayers money to bail out my credit card company if I go on a huge spending spree and can't pay it back? I ask, as that's essentially what he's doing with my money (as a taxpayer) with Northern Rock.

NR should either stand or fall on the merits of its business model; if the business isn't sound then it should either have a firesale to give it time and some money to attempt to rebuild the business or sell itself to the highest bidder.

The message to other banks is not good; don't worry about the quality of the business you write as the taxpayer will bail you out if need be. This is not a good thing.

[Ekko Star]

What worries me, is presumably the Bank of England were offering their funds to banks as a lifeline if they needed it, right? Now, what bank in their right mind is going to approach them for that lifeline, should they need it, after this debacle?

Banks and Financial institutions borrow money from each other all the time at inter-bank rates.

At the moment the banks are reluctant to make any large scale loans which is where NR have got a little stuck. There's nothing wrong with their business, it's a sound bank with a sound balance sheet. All this is, is a short term liquid fund arrangement with the BoE.

NR were borrowing the same money from all the other banks every other day as part of their normal course of business anyway.

[unrealnils]

other banks have had there shares drop like hbos is now a good time to buy shares in hbos or osmething similar as they are bound to go back to nromal levels soon enough ??

Just a thought

[giger]

Personally (and this isn't meant to be at the expense of others) I would be very interested in having a punt on Northern Bank shares (and other banks for that matter) as in all likelyhood they will recover.

Anyway, as said before, the thing that could ruin it for everyone here is if Northern Bank customers continue to pull all of there funds. This could have a serious effect on UK economy and could lead to changes in the housing market. The bank is not actually in trouble, but could be if all their customers take the money and run. Their money is safe, leave it where it is and ride out the problem

These are my opinions and nothing more.

[Ekko Star]

cover.Anyway, as said before, the thing that could ruin it for everyone here is if Northern Bank customers continue to pull all of there funds. This could have a serious effect on UK economy and could lead to changes in the housing market. The bank is not actually in trouble, but could be if all their customers take the money and run. Their money is safe, leave it where it is and ride out the problem

NR is not a major savings bank. If it was it would not have to borrow the money from other banks.

NR borrow the money from money markets and lend to mortgages. They borrow money, to lend money in order to make money.

There strength of balance sheet is not their savings on tap it is their quality of mortgage debt. They're the 5th largest mortgage lender in this country and they have a very solid balance sheet because of it.

I doubt very much they will go under, however at the current share price they are a sitting duck for a takeover. It is a bargain for any bank which wishes to take them over. Right now the big banks will be doing their sums to see where they want the NR share price to come down to before they plunder the market for the shares to take over.

Not only do you have the Chancellor backing you've got the BoE that are both guaranteeing it. People are panicking irrationally and in the meantime that is causing a run on the bank.

[KRW]

Banks and Financial institutions borrow money from each other all the time at inter-bank rates.

At the moment the banks are reluctant to make any large scale loans which is where NR have got a little stuck. There's nothing wrong with their business, it's a sound bank with a sound balance sheet. All this is, is a short term liquid fund arrangement with the BoE.

NR were borrowing the same money from all the other banks every other day as part of their normal course of business anyway.

Yeah, the normality of this sort of borrowing is what I was talking about. How many other banks are/were borrowing from other banks every day and where will they borrow from if they cant go to other banks or the BOE? Am thick with finance, so forgive if its a daft question - and this wasnt exactly under the same arrangements as their borrowing from other banks - wasnt the interest rate from the BOE 1% above the LIBOR rate?

[Ekko Star]

wasnt the interest rate from the BOE 1% above the LIBOR rate?

The BoE is considered the lender of last resort, so it's rates will always be the least favourable. It is not generally involved in the commercial money markets to lend and commercial banks tend not to borrow from it.

[Steve1977]

Whats the situation with regards to Loans? I have a loan with Northern Rock...were they to go under, would I be let off with regards to my loan or would I have to pay the remaining amount immediately?

[Ekko Star]

Doubt very much that they will go under. As I say the Chancellor and the BoE have backed the bank. That's a pretty solid pair of guarantors ;)

Banks make money by lending and right now everyone is very cautious about lending due to the sub prime fallout in the US.

The day the banks stop lending outright is the day the markets hit complete financial meltdown. Unlikely collapse really.

If someone took over they would simply take over the debt, you will still need to pay back your loan/mortgage. Unfortunately for you and fortunately for them, you are what makes up their assets.

[KennyVader]

http://news.bbc.co.uk/1/hi/business/6999615.stm

How many banks will suffer a run, and will they (us) guarantee every one then?

Not too happy about this. Why is Northern Rock, a publicly traded company, being thrown this lifeline with taxpayer's money, when the predicament they're in now is due to their own business model and bad planning? Why isn't every business in trouble getting this lifeline?

Could it be that given the origins of the NR, most of their savings customers live in the North East in strong Labour heartlands?

Yet another kneejerk panic move by our so-called government.

I hope the government is ready to fully guarantee all deposits with ICICI bank, which is where my savings are.

[NicolaUK]

I hope the government is ready to fully guarantee all deposits with ICICI bank, which is where my savings are.

I thought that ICICI was an Indian bank?

I do wonder what will happen to NR shares tomorrow, could the tide be about to turn?

[Bobo Justus]

Ooh, I hadn't caught that news about the full guarantees. That's worrying.

[Radiohead]

Not too happy about this. Why is Northern Rock, a publicly traded company, being thrown this lifeline with taxpayer's money, when the predicament they're in now is due to their own business model and bad planning? Why isn't every business in trouble getting this lifeline?

Could it be that given the origins of the NR, most of their savings customers live in the North East in strong Labour heartlands?

Yet another kneejerk panic move by our so-called government.

I hope the government is ready to fully guarantee all deposits with ICICI bank, which is where my savings are.

My suspicion is that the government know there is no chance of people losing money with Northern Rock. They can therefore come out and say this, giving the impression of control without ever having to back it up.

[grahammcelroy]

I don't understand why everyone is getting so hung up on the whole issue of the guarantee or using "public" money. Just to clarify - the BoE and the FSA have looked at NR's books and will only lend them funds against assets i.e. for each £1 the BoE lends NR, it wants to have £1.05 in assets as security.

So on this basis they can be sure that NR will not go bust (As the sum of all its deposits + other borrowings is less than the value of its assets), and can offer the guarantee without it actually costing a penny. ;)

All the people panicing and rushing to withdraw savings haven't really thought this one through - NR has more assets than deposits, so their cash is safe, otherwise the BoE wouldn't offer the lending facility. The only loosers in this crisis will be the Employees of NR and its Shareholders.

[KennyVader]

Well NR up just over 11% now and on average still rising, A+L up 27% (!) so far, looks like they are the one to make money out of in the background of everyone watching NR shares.

So yes it would seem that the tide has turned now.

[evilsly]

I wouldn't call the end of the downturn yet, it's where the shares are this time next month that matters.

There was always going to be an upward blip today as the shares had reached such a low point. The underlying problems that caused the crisis are very much still there.

[NicolaUK]

Ever the optimist :D

[panmaster]

Hi, think ive gone mad..

Ive just brought 100 northern rock shares at £3.05 each..

Im gonna ride the wave see where it takes me. Its only money. I believe in time will bounce back and even if only climbs half way back will make money..

Stop taking money out,, put money back in..

please let me know if you think my move is bad to buy shares etc.

[evilsly]

empiricist, neither optimist nor pessimist.

[Tommo2002]

or realist?

[KRW]

Still queues outside Northern Rock in Bromley, at least. :(

[andybhoy]

Will Alistair Darling potentially use taxpayers money to bail out my credit card company if I go on a huge spending spree and can't pay it back? I ask, as that's essentially what he's doing with my money (as a taxpayer) with Northern Rock.



He's not bailing out NR - if tax payers money is used, then it will be because NR have gone bust. He'd be bailing out savers.

Your money won't be used in any way whatsoever.

Today and tomorrow, we're now having to run around like blue arsed flies writing programs to allow customers to reopen their accounts.

[catch22]

Panmaster you may make a profit if the "Banks" move in to "take over" and start buying up all the shares. - bit of a gamble but as you say it's only money and perhaps more fun than going down the bookies! I like your spirit!
Stupid for investors to take money out now It's the only bank in the country underwritten by the Governement! Not only that but investors would loose out if taking their "bonds" out ahead of time et al - but then there's nowt as daft as sheep

[AdamBrunt]

He's not bailing out NR - if tax payers money is used, then it will be because NR have gone bust. He'd be bailing out savers.

Your money won't be used in any way whatsoever.


As the radio was saying this afternoon .... it will still be taxpayers money bailing the savers out.

Why should everyone else 'suffer' just because a private business has a flawed business model ??

[firekill]

well , i ,ve gone & brought some nr shares about £900 worth , fingers crossed but i,am in it for the long haul

[evilsly]

and the share price is going down again today, wiping out all of yesterdays gain and is currently 20 points below it's previous record low.

[stillill]

As the radio was saying this afternoon .... it will still be taxpayers money bailing the savers out.

Why should everyone else 'suffer' just because a private business has a flawed business model ??

Agree. It should be the banks' own Financial Services Compensation Scheme (a pot filled by other banks if one goes bust) that bails out savers, surely - not the Govt.

Only NS&I is supposedly Government-backed (that's why their interest rate is lower - it's less risky). If savers want the higher rates offered by other banks, surely they should take the risks? Or have all NS&I savers been screwed for that disparity in interest rates if everyone else gets the same protection in "private" banks? It is a total crock.

[Dick Long]

Agree. It should be the banks' own Financial Services Compensation Scheme (a pot filled by other banks if one goes bust) that bails out savers, surely - not the Govt.


Just read in today's paper that 'no UK bank has actually contributed to the FSCS fund since it was started in 1991' :?: :?:

[stillill]

Just read in today's paper that 'no UK bank has actually contributed to the FSCS fund since it was started in 1991' :?: :?:

They don't contribute until one of their number go *pop*, according to their FAQ. Then they delay and faff and flimflam then put money in the pot (theoretically, unless they've all gone pop).

Imagine how long it would take for (for instance) NR customers to get their 90% of 30k back. Months/Years... No wonder the grannies weren't hanging around to find out if the FSCS could help them. No matter, Brown has ridden to the banks' rescue with our money... Free market? Democracy? *chokes on cake*

[NicolaUK]

I have been amazed by how many people before this crisis thought that their savings were safe, even if a bank went bust. There seems to be plenty of information about how share prices can go up and down and or that you could lose your home if you don't keep up with mortgage payments but don't remember seeing similar warnings to savers?

I do wonder if will lead many people to having the same thoughts about savings as they do towards pensions - 'Why bother? I may aswell live for today as I could lose it all due to no fault of my own'

[andybhoy]

No matter, Brown has ridden to the banks' rescue with our money... Free market? Democracy? *chokes on cake*

I am starting to think that everyone just reads the headlines.

Your money won't ever go to NR. The bank is not being rescued by your money. It will be bought out and sold off, and I along with several thousand others will be on the dole.

[stillill]

Sorry, meant it as more of a general "banks can do what they like, BoE will pump cash back into the markets whatever they do", rather than a "BoE saving the NR". It isn't Mervyn King's pocket money that's being pumped into the money markets, or offered as a bail-out to the banks. It's yours and mine, and it's being devalued every time they pull a few more billion out the printing presses.

More on the line than just NR jobs, AndyBhoy. We'll all be in a pickle soon enough. Brown's still pulling the strings in our central bank, and appears to be acting for his own "healthy economy! prudent government!" agenda until he's secured an election win.

ps, I don't read the papers.

[andybhoy]

Sorry if I was a bit snippy - I just jump at that line, because I am hearing it so often. NR are about the only people in the country who won't benefit from it.

TBH, the BOE should have pumped money into the system 2 months ago, when all the other central banks did - not because it helps the banks but because of the damage failing banks cause to the economy.

Yes, in the short term it devalues money but it's preferable to the possible alternative - which is a bog economic downturn.

Today's announcement is too late for us.

Brown - nothing surprises me about him - he knows he needs to get his term secured soon, just in case. That should worry folk.

[stillill]

No worries, am sure it's a testing time.

Agree something should have been done a good while back, but it's not failing banks that damage the economy, that's just a symptom. The damage has already been done by cheap unsecured credit, and only now are the banks failing because they don't know who's holding the subprime bomb.

As the BoE try and support these clowns, the taxpayer is being made to carry all the risk. It's the same in the US, a rate cut to help the banks, but sign the death warrant of the Dollar and anyone that's got any. A rate cut here next month is surely on the cards.

[andybhoy]

Pretty sure a rate is coming next month (announcement is due on the thursday after the first monday of the month but that's the 4th of October which is very early in the month).

The damage started when Labour first got in - christ knows how bad it'll get.

[GlennSh]

The damage started when Labour first got in - christ knows how bad it'll get.

Playing devil's advocate here, but anyone remember Black Wednesday ? The Tories didnt do a particularly good job with the economy either :nuts:

[stillill]

True, none of them know what they're doing - so why strong arm the central bank into ballsing things up further... King's treasury select committee meeting tomorrow could be interesting, if he's got any scruples we could hear some frank admissions. Else he'll hang on and hope to get a gong from Gordo if he keeps his trap shut.

PS,
though am sure some Tories must have lost some posh money when Barings when to the wall they didn't bail it out. Labour thinktanks have however apparently taken generous handouts (100ks) from NR in the past, and also employ Brown's favourite pollster. Board member Derek Wanless of NR has also been a favourite of Brown, sitting on a couple of Govt. quangos, and producing favourable reports.

While both Labour and Tory appear to have had ups and downs at running economies, Labour appear to be quite a bit more cosy with the bank they step in to save.

[evilsly]

more bad news for NR

http://news.bbc.co.uk/1/hi/business/7004109.stm


what chance them attracting new business now ?

[Daneel]

Share price dipped to £1.85 a few minutes ago. Both my online share dealing services seem unable to let me buy (Motley Fool UK and selftrade).

[KennyVader]

Yep currenty hovering about 200p, 22% down on opening this morning.

What are you going to do now, Darling?

Was an absolute mistake for the government to get so involved in this fiasco. It's going to absolutely bite them in the arse when the next bank starts to topple.

[Prufrock]

Interesting to see that Deutsche Bank bought a 3.64% stake in NR yesterday (£35M in shares).

[GregB]

i;ve been out of the country during this so the thread has made an interesting read. A point that I don't think has been made is that a lot of people withdrawing there money could have have been remembering the losses made when BCCI was closed down in 1991. The circumstances were different but I for one would have been in the queue to withdraw my cash from NR if I'd had money with them.

[Prufrock]

The market closed at 187.40. I reckon the only way out now is a take over. DB's buy up yesterday is interesting - could they really be interested in possibly buying up NR?

[andybhoy]

Pretty sure Dodgy bank sold their shares or that it's a simple short term thing. They're definitely not after us, I am sure.

Credit Suisse I am told bought 4.8% today.

Big meetings at NR today and the current mood is that we are looking to keep the business as is, not sell but if we do sell it'll be on our terms. How much of that I believe but it is the only chink of light I have.

We have had thousands of cutomers cancel transfers out, and are this weekend putting in a new system to allow customers to reopen their account as if it was never closed (including paying them their chaps fee, any penalties and interest they would have acrued).

A takeover isn't the only option - it certainly isn't the best for either the bank or the people working for it. (It's not the worst either - that would be being bought to sell off the mortgage book). The bank could survive by returning to it's strengths (a regional mortgage company, where growth is prudent).

They're still one of the most efficient banks in europe, and it will be a shame if a flawed funding model (the only thing that was flawed about NR) and a complete lack of support end it.

And a message for Merv King - thanks a bundle, your insistence that a bank "feel the pain" is showing that the only people hurt, are the staff - no golden handshakes for us.

[Prufrock]

Andy, I'm really sorry to hear about your predicament. However, there's a high likelihood that NR will need to go through some sort of rebranding exercise at the very least if they are going to stay afloat on their own. All this costs money (along with the other things you've mentioned). That means hard times ahead for employees and customers alike.

[andybhoy]

Absolutely agree - rebranding is vital. They have some bigwigs from London coming (NOT Max Clifford!) this week or next week.

The thing is, we ARE solvent - we're incredibly efficient and despite scaremongering rumours have a good quality loan book. This really was a short term problem and we'd have ridden it out.

[Prufrock]

Absolutely agree - rebranding is vital. They have some bigwigs from London coming (NOT Max Clifford!) this week or next week.

The thing is, we ARE solvent - we're incredibly efficient and despite scaremongering rumours have a good quality loan book. This really was a short term problem and we'd have ridden it out.


Oh, I know NR is solvent and the current share price does not reflect the true value of the assets NR has (which is why I am still considering buying shares). The problem here seems to be the way the media has dealt with the whole situation, causing panic amongst ordinary members of the public when there was no reason to worry. I just hope NR can hang on in there.

[evilsly]

my worry is the media has decided that NR is to be the sacrificial lamb in the current credit crunch crisis.

another similar day for the share price tomorrow, and a take over is a dead cert, and probably on not very good terms.

[green_cat]

Absolutely agree - rebranding is vital. They have some bigwigs from London coming (NOT Max Clifford!) this week or next week.

The thing is, we ARE solvent - we're incredibly efficient and despite scaremongering rumours have a good quality loan book. This really was a short term problem and we'd have ridden it out.

Andybhoy - I hope things turn out well for you and your colleagues I really do.

But I also wonder about Northern Rock's business model, past LTV ratios and the fact its grabbed a big proportion of the last year's mortgage business.

To me, the Together mortgages/loans look particularly dodge (perhaps the high quality loan book is down to people using the unsecured loan to pay the mortgage?)

And my guess is that the CDO mess will get a lot worse before it gets better. I found this a really good introduction:

http://articles.moneycentral.msn.com/Investing/SuperModels/AreWeHeadedForAnEpicBearMarket.aspx?page=1

None of which bodes well for banks relying on cheap money in the medium term.

[panmaster]

Hi , i brought 100 shares the other day at 3.05 bit of an impulse buy i know..

They have dropped and dropped, what to do now ? any suggestions.

Im hoping to ride the storm for a while and if lucky will rise very slowly but back to some decent level.

What will i get if they are brought out?

OR shall i get more impulsive and buy more?

[andybhoy]

Greebcat, the main issue is that they were so agressive in trying ti boost their market share (they wrote 1 in 5 mortgages inthe lats year), that's where they have expanded too quickly.

The quality of the loan book is in a lot of things but one of the indicators is that they have half the industry standard in terms of a percentage of people 3 or more months behind on the loan. You don't get those figures by lending too much to each individual.

We';re still battling on and working hard (I've done 70 hours in a week). On Monday we should put live the system that will allow customers to turn their accounts back into the condition they were before they left. A lot of people have come back, or are in the process.

It's all about how much the media want us to be bought out - if they keep pushing the worst aspects (and the exaggerated worst aspects) we'll be ******. If they leave us be, we'll survive.

[arrowst]

It's all about how much the media want us to be bought out - if they keep pushing the worst aspects (and the exaggerated worst aspects) we'll be ******. If they leave us be, we'll survive.

The problem is the media have already done the damage, and it's now impossible to tell the value of the company as all previous predictions are shot to pieces, hence the run.

I think there's a very good chance they may be bought out for even less than the current share price, by a vulcher looking to buy up a quality loan book on the cheap. The Northern Rock "brand" is more or less destroyed going forward.

The opposite, probably riskier view, is that most of the losses have been caused by media hysteria, and the shares are currently fantastic value. Whichever, the market's never easy to predict, and those city boys will certainly have to earn their bonuses with this one.

Hope everything works out for you Andy.

[green_cat]

Greebcat, the main issue is that they were so agressive in trying ti boost their market share (they wrote 1 in 5 mortgages inthe lats year), that's where they have expanded too quickly.

The quality of the loan book is in a lot of things but one of the indicators is that they have half the industry standard in terms of a percentage of people 3 or more months behind on the loan. You don't get those figures by lending too much to each individual.

I suppose my point about the Together loan/mortgage combo (up to 125% of house price combined) was that you could survive quite happily for a few years using the loan to make the repayments on the mortgage and loan even if you had no other income. Combine this with self-cert and raising the "deposit" on credit cards it's easy to see how the UK could have it's own sub-prime crisis.

It will be "interesting" to see if the loan book retains it's quality.

As usual it is the hardworking staff - like yourself - who will likely get stuffed while the architects of the mess - the Directors - walk away with the loot.

There's quite a good article in Today's Torygraph on a guy who apparently predicted the sub-prime crisis:

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/09/22/ccprof122.xml

[andybhoy]

I suppose my point about the Together loan/mortgage combo (up to 125% of house price combined) was that you could survive quite happily for a few years using the loan to make the repayments on the mortgage and loan even if you had no other income.

I'm not certain off the top of my head but I thought the rate was higher on the unsecured loan part. I haven't dealt with the mortgage side of the business for several months and never delved far into the types (as a programmer we generally deal with data at a much lower level).

However, I have a day off tomorrow - first in 2 weeks and I'm going to do nothing at all - just relax and hopefully forget about NR for a while.

We're battling - I stil think a takeover is on the cards but NR have made it plain that they're fighting to stay independent.

[pjclark1]

The news this morning said they have borrowed £3 billion from the BoE

[andybhoy]

edit.

[evilsly]

another 22 points off the share price today (11%), it's not looking good at all :(

[andybhoy]

Yep, am starting to feel we'll be sold for pennies and broken up

[roddy22]

another 22 points off the share price today (11%), it's not looking good at all :(

Although it looks terrible it opened today at 175 and closed at 172 so near enough the same level it started at this morning. The 22 points is from a high point reached earlier in the day.

[evilsly]

actually the 11% drop is off the previous closing price (Prev Close: 194.30)

the fact that it opened lower than the previous close is another bad sign.

[andybhoy]

actually the 11% drop is off the previous closing price (Prev Close: 194.30)

the fact that it opened lower than the previous close is another bad sign.

Not really - that happens every weekend anyway. They process sell orders before buy orders (IIRC) and NR has a lot of sell orders just now anyway. At leatrs most of those ****** up shagwits who've been short selling us, won't make much more off our misery.

The worse sign is that they rallied to over £2 a share, but still dropped to 11% down.

[KennyVader]

Will we see yet more droppage tomorrow?

http://news.bbc.co.uk/1/hi/business/7012768.stm

Northern Rock withholds dividend

Northern Rock will not pay the interim dividend it announced in July before August's market turmoil, BBC business editor Robert Peston has learned.

The firm has bowed to pressure from the Financial Services Authority (FSA) and the Treasury not to make the payment - worth £59m - Mr Peston said.

However, it is likely that the bank will defer the dividend payment, not cancel it altogether.

An official announcement is expected later on Tuesday or on Wednesday.

Or would seasoned investors have anticipated this?

[Ricinus]

The Express's Business Editor said in his report this morning that he thought the Rock should withdraw the dividend payment. That was before it was announced that they were doing so. So I suppose it shouldn't be that surprising.

[stillill]

What's happening now Andy? Read in CityAM that there's even odds on a buyout for (unfortunately) asset stripping, or NR will be bought by some eccentric Spanish billionaire.

[andybhoy]

Not sure - I haven't been in since Thursday (have been off sick). Won't be back till tomorrow.

I have heard rumours of quite a few banks looking at the books (including an American one) and of course something about some spanish wine owner.

The one that worries me is anything to do with asset stripping. Bunch of vultures.

Sickens me that people are betting on it. That's pretty vile and I hope what goes around, comes around.

[caygs]

Well Northern Rock shares in freefall again - currently 87.9p down from 104.2p overnight. And Alastair Darling is getting a battering over the £24bn the government has pumped in, including warnings that the loan may amount to illegal state aid and might get Europe involved.

I do hope that the one thing that comes out of this is a change to the rules to allow The Old Lady to lend to banks without having to make it public - doubt the problems would have been half as bad if they had been able to get the loan without all the hype.

[Island Swing]

The equity is worth bugger all now, down 41% on the day and shares suspended. Bad news for any bargain hunters that bought on the initial fall.

79p now and likely to fall further. :(

[sigur]

Well Northern Rock shares in freefall again - currently 87.9p down from 104.2p overnight. And Alastair Darling is getting a battering over the £24bn the government has pumped in, including warnings that the loan may amount to illegal state aid and might get Europe involved.



I think they have went down to around 60p today.

I do hope that the one thing that comes out of this is a change to the rules to allow The Old Lady to lend to banks without having to make it public - doubt the problems would have been half as bad if they had been able to get the loan without all the hype.

Im not sure if I agree with the idea of public money being used in this sort of manner and I feel that the loan being made public was the correct decision.

[caygs]

Im not sure if I agree with the idea of public money being used in this sort of manner and I feel that the loan being made public was the correct decision. Trouble is that people panicked when there was no need to and made it worse than it was. I don't know what the answer is, and now that its up to £24bn thats an awful lot of money we the taxpayer could lose. And the capitalist in me does not like the idea of the government bailing out a failing company when the free market has spoken.

But I guess the flipside here is that people's savings were under threat and the government felt it had to do something to stop the panic. Just a shame they waited so long to do so!

Like I say, don't know what the answer is here but when you look at the amounts some of the bigger banks are writing off without much impact on their profitability, you have to say that something was not right about the Northern Rock model.

[KennyVader]

Well Northern Rock shares in freefall again - currently 87.9p down from 104.2p overnight. And Alastair Darling is getting a battering over the £24bn the government has pumped in, including warnings that the loan may amount to illegal state aid and might get Europe involved.

It's a hideous mess. What happens come Februrary is going to be very interesting. Right now it looks like good old UK.gov may be trying to bend the rules to avoid the charge of State Aid. What a surprise.

I do hope that the one thing that comes out of this is a change to the rules to allow The Old Lady to lend to banks without having to make it public - doubt the problems would have been half as bad if they had been able to get the loan without all the hype.

I don't agree with that. Any other publicly traded company would have to announce loans or troubles of this size to the stock market more or less around the day they happened, so in this age of shareholder profits being king, I don't see why a bank with a shoddy business model should get special protection. I agree with there being a deposits guarantee scheme up to a certain amount but that's really no different to an insurance scheme, it's a bit like the guarantees you get if you book a holiday with an ABTA member.

[cedge]

Haven't said anything yet but NR and The Government are really in the **** now!

I can't believe they gave them all our money thinking that someone would take them over and everything would be fine and dandy again. Businesses only have one thing in mind - profit and the way the share price is heading the offers on the table are probably not far off the current price which NR should have accepted! Too late now!

[pjclark1]

The equity is worth bugger all now, down 41% on the day and shares suspended. Bad news for any bargain hunters that bought on the initial fall.

79p now and likely to fall further. :(

As I originally said, Marconi all over again, these shares will be worthless soon.

[Prufrock]

Looks like Branson's managed to get NR. It's going to be rebranded Virgin Money. Apparently, Branson's offer was the best for the bank and its investors.

[andybhoy]

That;s just the prefferred bidder - my feeling is that the shareholders will say "if we're getting screwed, everyone's getting screwed" and block the sale. Then we'll get nationalised and run down.

The shareholders have had over 2 months to sell their shares - if they've chosen to buy or hold, then that is their gamble. The staff with share options and share saves have lost far more than most other shareholders, and there was nothing they could do about it.

[KennyVader]

Yup terms of the deal confirmed this morning

http://news.bbc.co.uk/1/hi/business/7112481.stm

Immediate repayment of £11bn of the loans to the Treasury
Repayment of the remaining £14bn over the next three years.

I'm not sure if Virgin will pay interest (or if they do, at what level) on that £14bn of public money. Pretty tall order to have to turn the business around and make enough profit to start making a dent in that £14bn debt though.

[andybhoy]

That's not how it works Kenny, the 14b won't come out of profits - it'll come by taking different commercial loans.

The BOE loans replaced commercial loans (apart from the money that went to savers running for the hills), because the banks were still not lending to one another. Things are improving now (hence 11 billion now, coming from commercial loans) and eventually they'll replace all the BOE loans with such.

[KennyVader]

Well despite lots of early share sales first thing, they seem to have bounced back up on this news now, currently at 113p, up about 32% on Friday.

http://uk.betastreaming.finance.yahoo.com/q/bc?s=NRK.L&t=5d&l=on&z=m&q=l&c=

[andybhoy]

At one point it was over £1.30.

The reason there are more buys now, is because people want the opportunity to buy the new shares at 25p (as that's what will be offered to existing shareholders). I am not sure I'd be willing to pay £1 for shares now, just to be able to buy more at 25p though.

Some whispers that improved bids will come in from other interested parties. I hope not to be honest - as I don't want to see Cerberus involved (they'll sell everything off right away in their own auctions).

[arrowst]

The shareholders have had over 2 months to sell their shares - if they've chosen to buy or hold, then that is their gamble. The staff with share options and share saves have lost far more than most other shareholders, and there was nothing they could do about it.

Surely with the share options you can get your money back though without taking up the options though (usually with 1-2% interest on top)?? And as a private shareholder, choosing whether to buy or hold is a nightmare at the moment, as it's impossible to know when the share price is going to hit rock bottom (which could be zero in the end). It'll be especially difficult for those who paid £10-12 a share, and I suspect most of them will stick with it now, as it's just not worth cutting your losses at this point.

I'd also expect the price to dip (at least initially) tomorrow in response to RAB Capitals response to the bid, which I think only came out as the market was closing today. (Although I thought it would dip today so what do I know :))

[andybhoy]

Surely with the share options you can get your money back though without taking up the options though (usually with 1-2% interest on top)?? )

That's the share save.

With the share options, I watched my option go from £5000 to £0. I also watched my shares go from £2000 to about £150.

I am lucky though. With the share save, people have seen the value go from £100,000 to £0. Some of those are couples, so they've lost £200,000. Yes, they'll get their £21k back but not much of a consolation.

The share save most affected, matures next year or the year after (not sure). When it came out, people could go in for 3, 5 or 7 years, saving up to 3k a year. The lucky ones were the 5 year members, as their share save matured this year and they copuld get as much out as possible.

I know that people can argue that as it hadn't matured, they never really had the money but I don't think there is a person on earth who wouldn't look at it as lost money. Especially when for many, they've scrimped and saved for several years - only to lose almost everything.

And on top of that, they may still lose their careers, and homes!

I agree it's hard for normal shareholders to know when to sell or hold but my issue is with those complaining that the offer is not generous enough. Many of these holders have screwed themselves by not selling at £7, £5, £4 all the way down to £1. They then had a second chance when the price went back up to £3.

Any lack of generosity from Virgin is a pale immitation to the lack of generosity the shareholders showed themselves.(and I don't agree they're lacking generosity - current shareholders could still make a fortune from growth).

Anyway, I feel almost certain just now that the SH will block it, and we'll get put into administration.

[KennyVader]

That's the share save.

With the share options, I watched my option go from £5000 to £0. I also watched my shares go from £2000 to about £150.

Don't understand that. If it's a share option scheme, surely you just choose not to exercise the option, so what has been lost? Similar happened to me a few years ago when a company I worked for and had share options in got fully acquired by another company, which rendered the options worthless. They're a gamble, sometimes they pay off, sometimes they don't.

I am lucky though. With the share save, people have seen the value go from £100,000 to £0. Some of those are couples, so they've lost £200,000. Yes, they'll get their £21k back but not much of a consolation.

Not following that either. How have people lost £200,000?

And on top of that, they may still lose their careers, and homes!

Well I'd imagine a large number will get other jobs to be fair. I don't see that the collapse of the bank instantly makes everyone unemployed and with absolutely no hope of finding something else.

Anyway, I feel almost certain just now that the SH will block it, and we'll get put into administration.

Which leaves every single taxpayer in the country looking at contributing £500-£1000 each to the whole debacle, which is the real unfairness in all of this, considering most of those taxpayers have nothing whatsoever to do with the Northern Rock and never have.

Have you got Adam Applegarth's address anywhere? I think we should all go ask him for our £1000 back, since his team's hopeless business plan is the root cause of this fiasco.

[arrowst]

I know that people can argue that as it hadn't matured, they never really had the money but I don't think there is a person on earth who wouldn't look at it as lost money. Especially when for many, they've scrimped and saved for several years - only to lose almost everything.


Like Kenny above, I'm a little confused as to how people have actually lost money on this. If it's the share save (where you get given a discounted fixed price at the start of a 3, 5 or 7 year term, yes?) then if the share go below the specified price, then you just get all your money back. If they've already taken up the option, then they're no better or worse off than private shareholders in that they can cut and run at any time. Likewise, with the other scheme (which I assume is just a monthly tax free share purchase) they can sell those shares at anytime (albeit with a tax hit).

Your statement above says "they never really had the money",so do you mean that's what they would have made if the shares were still high (say at £12)??

Don't get me wrong, I have every sympathy with employees like yourself. I've got a lot of shares through my employer (which is also a bank) and they've taken a pretty big hit in the last few months, although nowhere near as bad as Northern Rock.

What do you mean when you mention a lack of generosity from the shareholders though?? Current (well new) shareholders could make a fortune, but they could also lose everything, and it's a fine balance at the moment.

I personally don't think you'll go into adminstration, and whilst they company will be a shadow of it's former self, I think it will recover over the next 5-10 years, be it under the Virgin name or some other guise.

[andybhoy]

Well thanks folks, I work as a code monkey for NR - but obviously I need stamping on, with the usual ******** about the taxpayers all giving 1k each - the taxpayers haven't spent a penny nor will they ever spend a penny. (they loan was created out of thin air, and will be uncreated in the same way)

I'm done here - if anyone wants a punching bag, go find someone else.

[arrowst]

Well thanks folks, I work as a code monkey for NR - but obviously I need stamping on, with the usual ******** about the taxpayers all giving 1k each - the taxpayers haven't spent a penny nor will they ever spend a penny. (they loan was created out of thin air, and will be uncreated in the same way)

I'm done here - if anyone wants a punching bag, go find someone else.

:shrug: I'm not sure what makes you think I'm stamping on you mate, but no offence intended

[KennyVader]

I see the treasury is now offering full guarantees to any commercial institutions that lend the Northern Rock any money.

So essentially other institutions can lend the NR some funds, charge them interest, but at no risk to their cash.

How the government can still be hoping to avoid any charges of State Aid I don't know.

http://news.bbc.co.uk/1/hi/business/7149405.stm and various other news sites.

[jester]

IMO NR will now eventually end up under State Ownership, even if not in name. Post christmas could be an interesting time credit wise what with the banks increasingly unwilling to lend to each other. Its not just about finances in place remember is also about credibility and confidence. I do not think that a full blown crash is on the cards but everyone from consumers upwards are and will be tightning belts and rules etc.

[cedge]

Up to £54bn now (£2,000 per taxpayer) :eek:

[KennyVader]

Well, looking very likely to be going down the nationalisation route, announcement expected within days, new laws to be drafted to enable the transfer of ownership :|

http://news.bbc.co.uk/1/hi/business/7190726.stm

Commercial offers (from Virgin etc) being dismissed as they require too long a subsidy period and would likely stuff the government under State Aid regulations :|

Meanwhile, bonuses of up to £100k/year have been approved for 173 key staff (http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article3177668.ece)

Some day someone will make a film about this.

[caygs]

Well, looking very likely to be going down the nationalisation route, announcement expected within days, new laws to be drafted to enable the transfer of ownership :| Took a little bit longer, but yes just been on BBC News 24 and on the BBC.co.uk news ticker that the government are nationalising Northern Rock.

Looks like Virgin were not prepared to stump up the cash wanted.

[GlennSh]

From what I remember reading a month or so ago, it wasnt the fact that Virgin weren't prepared to stump up the cash, it was the fact the government wanted their money back within 3 years.
This meant Virign having to make immediate redundancies (and therefore would have been very embarrassing for the government)

So why is it being nationalised as opposed to being made insolvent like any other PLC ? Is it just to safeguard customers money ? What happens if other PLCs ever go under - will the taxpayer have to bail them out too ??

[stillill]

It's a bank in the Labour heartland of the North East. They'd haemorrage voters if NR went any more bust.

Also, isn't some board member a Labour party advisor?

[GlennSh]

so another scandal in the making then :nono:

[KennyVader]

Shares to be suspended first thing tomorrow ... presumably to stop mass sales as holders scramble for what pennies they can.

http://news.bbc.co.uk/1/hi/business/7249575.stm

Nationalisation will be pushed though parliament with emergency legislation on Monday.

How is it that they can make emergency instant legislation on something like this, but can't do anything so quickly about benefit scroungers or their own party members accepting dodgy donations :shrug:

And why have they waited this long? Dither dither dither.

[GlennSh]

Doesnt say much for Brown. His first proper decision in charge and I can see him (quite rightly) being hung out ot dry for this

[KennyVader]

Another thought --- it's going to be very interesting if there is a big recession around the corner and the government-run Northern Rock has to start repossessing loads of homes and kicking voters out on the streets. If it's supposedly going to be genuinely run in the public's best interest then the new NR won't be able to show any special mercy to it's customers in trouble.

And a point just raised on Sky News, why has this been announced on a Sunday afternoon? What other big business announcements have ever been made on a Sunday afternoon? Why didn't they announce it when the market closed on Friday or after close of business tomorrow for a Tuesday morning suspension? Wonder if news of some other big government mess-up is going to be buried tomorrow.

Finally, will be funny if all the MPs refuse to vote for the emergency legislation tomorrow :D

[jester]

Hey I was right about something !

The timing of the announcement is curious to say the least, although its probably more to do with curtailing any bid to block nationalisation by court process or something, ie announce on Sun PM, pass legislation Mon AM and wrap it all up Mon PM/Tues AM.

[KennyVader]

Hey I was right about something !

The timing of the announcement is curious to say the least, although its probably more to do with curtailing any bid to block nationalisation by court process or something, ie announce on Sun PM, pass legislation Mon AM and wrap it all up Mon PM/Tues AM.

Surely even with all the changes Tony made they can't just "pass legislation Mon AM" though? It must still have to go to some sort of vote and process?

[jester]

Its my guess that all this will be wrapped up in 48 hours.

[Grandmaster]

That's the share save.

With the share options, I watched my option go from £5000 to £0. I also watched my shares go from £2000 to about £150.

I am lucky though. With the share save, people have seen the value go from £100,000 to £0. Some of those are couples, so they've lost £200,000. Yes, they'll get their £21k back but not much of a consolation.

I'm sorry about your personal predicament Andy, but the whole concept of investing any kind of money in shares is that you are at the mercy of the markets. You seem to be looking at an investment in the stockmarket as a 'sure thing' equal to a bond, or something like that.

Usually these share schemes are great savings vehicles, but there's always an element of risk. At least the share save people are getting their money back - the same can't be said of other people who've invested their cash into the company.

[Coolio]

Are there any risks involved in me getting some of their fixed rate bonds?

Is it, in effect the same as a Govt bond now ratings wise/

EDIT: Just checked on BBRG and it gets an A- rating. If its govt backed surely it should be AAA?

[caygs]

http://news.bbc.co.uk/1/hi/business/7302312.stm

2000 job losses announced by 2011 but the deal is still to be approved by the EU. I guess if the EU say "non" then that is NR down the toilet and everyone out of work?

[KennyVader]

By 2011? That's one hell of a notice period.

[Kryten]

I guess if the EU say "non" then that is NR down the toilet and everyone out of work?

And every UK tax payer massively out of pocket!

[Ono]

I would suspect that most of the 1400 staff who work for Bear Stearns in Canary Wharf are going to be made redundant too.

[Coolio]

I would suspect that most of the 1400 staff who work for Bear Stearns in Canary Wharf are going to be made redundant too.

Not just them, there are at least another 2 big banks that have cut their staff by 5 and 10% in the last week

[Kryten]

Well they have made a £585.4m loss for the first six months of the year and just had to get £3bn of extra money from the <s>tax payers</s> government but have repayed £9.4bn apparently of the loan to BofE.

http://news.bbc.co.uk/1/hi/business/7542251.stm

Not best pleased personally

[bh1]

What would you like them to do?

[njc]

It should have been allowed to go bust, but now we're all saddled with an enormously loss making bank and having to shore up it's balance sheet.

It's another failure with the sticky fingerprints of Gordon Brown all over it.

[Kryten]

Now its probably for the best, but its still a case of they should have been allowed to go under. I believe that they have pretty much offloaded all their good mortgages now so are left with those in negative equity and bad mortgages that cannot go elsewhere (I am sure I read that they hold much higher than average in that category).

Still at least they have not collapsed now under tax payer money as that would be even worse!

[Mattie F]

I believe that they have pretty much offloaded all their good mortgages now so are left with those in negative equity and bad mortgages that cannot go elsewhere (I am sure I read that they hold much higher than average in that category).

How do you mean - offloaded?

There was a comment on the BBC story earlier (now removed) from some banking consultant/commentator saying something along the lines of anyone with a decent credit rating will have jumped ship leaving only dodgy mortgage holders at NR.

Sorry but that is nonsense - we've left our mortgage with them simply because we're on a great 5 year fixed rate. We're less than half way through a 4.74% 5 year fixed deal so why on earth would we have tried to move elsewhere for a higher rate? I can understand depositers running to get their cash back but as a borrower there's no risk in remaining with NR.

Maybe that's why his comments were removed - because they made no sense. Yes, no doubt NR has more than it's fair share of risky loans because of its unwise lending criteria but that doesn't mean it doesn't still have plenty of good loans on its book.

[beaky]

Now its probably for the best, but its still a case of they should have been allowed to go under. I believe that they have pretty much offloaded all their good mortgages now so are left with those in negative equity and bad mortgages that cannot go elsewhere (I am sure I read that they hold much higher than average in that category).



It wouldn't surprise me. We had our first mortgage on current house with them. We changed just before the problems started (end of deal). They let us borrow 5.5 x OH's salary (I wasn't working). We had financial assistance from his 'company' to pay the mortgage for x years, so could afford it, but they didn't know that and didn't ask, unlike our first mortgage company (Abbey) who wanted budget sheets completing for a small multiple on our first house.

Without it, there would have been no way we could have afforded the payments.

We've now since paid off a fair chunk and are on a tracker with something like 2.5 x joint incomes.

So it doesn't surprise me they got themselves in trouble tbh.

[Kryten]

Offloaded by basically increasing the rates so high that everyone in good credit jumped ship for sure. You will probably find that when your rate finishes it will go so high you will not stay with them.

Also not sure if they have sold off the assets at all to raise funds?

[Coolio]

I withdrew all my savings from them after they cut the interest rates a lot after getting the intial money in they needed following all the bad press they got.

[Mattie F]

Offloaded by basically increasing the rates so high that everyone in good credit jumped ship for sure. You will probably find that when your rate finishes it will go so high you will not stay with them.

What kind of business sense does that make though - trying to offload your best, low risk loans?

I would have thought if you had a mortgage with them and never defaulted then they'd try to hold onto you.

[bosque]

Have they still got that 7% Bond going ? When I went to the local NR store in mid-July to ask about it, I was obviously the first customer they'd seen all day (all month ?) and the lack of interest - a bored wave towards some grubby leaflets - made me feel very wary of putting any money their way, looked like a government office populated by people with non-jobs.

[Coolio]

I was on their e-savings account thing. Went from something like 6.3 down to 4.9%.

[KennyVader]

I don't understand how/why they have repaid £9bn, but are now borrowing £3bn again? Why not just repay £6bn? Have they (as Kryten suggests) sold off everything that's worth selling in order to artificially create a "happy headline" of "£9bn repaid" as a publicity exercise in order to make people think they are doing well again, and then hoped to keep the new £3bn loan from the taxpayer quiet?

The money for the cash injection will come by pausing repayments of the giant taxpayer loan made to the bank, and about £3bn of that will be converted into equity.

"Pausing repayments" doesn't sound good at all? That's the sort of thing that mortgage customers do when they get sick or made redundant!

In a further sign of customers finding it harder to make ends meet, it also said it was increasing staff numbers in debt management from 185 to around 500.

That also sounds grim. 6400 staff including all those staffing the (several hundred?) branches and 500 of them are chasing bad debts?

[DVDWotcha]

What kind of business sense does that make though - trying to offload your best, low risk loans?

I would have thought if you had a mortgage with them and never defaulted then they'd try to hold onto you.

Exactly. They are shooting themselves in the foot. If their kept their rates low there would be less people defaulting and they would continue to make interest on those loans. :doh:

[locutus_uk]

I took out a 5 year fixed mortgage with them last September (before this all went pear shaped) which runs until 2012.
Trying to stay positive about it and am planning for when it finishes as I don't want to end up paying silly money.

[jester]

Not wishing to stereotype anyone here but I can add this anectdotal experience to the "type of customer" debate.

We always considered NR to be a bit "dodgy" when it came some of the headline mortgage information available from them in that they would seem to lend anyone almost any amount of money. Whenever we looked at some of the small print though it really made our eyes water regarding charges etc that where added into the mortgage but where not up front so they appeared really affordable.

An example; the people we just bought our house off (they were first time buyers and bought in 2002 for £40K) had a NR mortgage. All the work they have done on the house (DG, CH, all electrics, roof, new staircase, kitchen, dampproof etc) must have come to at least another 30K on top. Now judging from the amount of mail they continue to receive from sub prime lenders I have to wonder how on earth they paid for it all. :?:

I am NOT saying that if you have or had a mortgage with the NR then you are like this however I do believe that because of the flawed business model of the NR it would attract a greater proportion of the less financially astute. In all my dealings with the vendors they came across as being a bit nieve financially.

I do believe that other lenders have exposure to this kind of risky lending but the NR's exposure must be far greater.

[Kryten]

I am NOT saying that if you have or had a mortgage with the NR then you are like this however I do believe that because of the flawed business model of the NR it would attract a greater proportion of the less financially astute. In all my dealings with the vendors they came across as being a bit nieve financially.

I do believe that other lenders have exposure to this kind of risky lending but the NR's exposure must be far greater.

Their plan was that should you default though the house price would be much higher and as such be able to profit from having good assets. However house prices stalled pretty quickly and started to go down leaving them very exposed to people defaulting and not having assets to cover the loan (short sale). Very bad (risky) business model really to have.

This type of mortgage typically did attract those with poorer finances and wanting to borrow way more than they could really afford or more than the house was worth (upto 125% mortgages were offered!).

[NicolaUK]

How do you mean - offloaded?

There was a comment on the BBC story earlier (now removed) from some banking consultant/commentator saying something along the lines of anyone with a decent credit rating will have jumped ship leaving only dodgy mortgage holders at NR.

Sorry but that is nonsense - we've left our mortgage with them simply because we're on a great 5 year fixed rate. We're less than half way through a 4.74% 5 year fixed deal so why on earth would we have tried to move elsewhere for a higher rate? I can understand depositers running to get their cash back but as a borrower there's no risk in remaining with NR.

Maybe that's why his comments were removed - because they made no sense. Yes, no doubt NR has more than it's fair share of risky loans because of its unwise lending criteria but that doesn't mean it doesn't still have plenty of good loans on its book.

:thumbs:

We've had our mortgage with them for around 13 yrs now and, like you, are half way through a 5 yr fixed rate - why anyone in a similar position would move is :nuts:

We've never had any problems with them, CS has been good when we've had to use it - there's an awful lot of speculation and assumptions flying around :lol:

I guess to some here I'm one step up from council scum :clap:

[malcy]

The issue is when you finish the fix rate deal (before then as posters above say you would be crazy to leave as anywhere else would be much more).

Because they no longer have the capital to fund new mortgages when your fixed rate term expires they want you to go elsewhere. If you are considered a "good" risk guess LTV below 80% or so they IIRC they have a deal with HSBC who will take you on and then NR get a commission for introducing you. Obviously you are free to go elsewhere if cheaper offers available to you.

The problem cases are if you don't move as I believe you will now be moved to the standard variable rate which is much higher than other lenders Halifax, Abbey etc because they only people who are staying are those who can't get remortgages elsewhere e.g. the 100% and 125% LTV people.

I also thought their lending practices where extremely high risk. A friend took out one of their > 100% LTV deals as had no deposit but then all the work they had to do on their flat plus stamp duty, legal fees etc was added to the loan so must have ended up at in the 110% to 120% LTV range. Their flat has now I guess fallen at least 10% so their LTV must be even higher.
No other lender on a remortgage would touch them with a bargepole in current climate.

[GlennSh]

So the taxpayer has to stump up £3bn to make up for bad management. Havent we got better things to spend our money on ?
Well done Gordon :(