All Options Open for Northern Rock: Darling
The British government is open to any measure to save mortgage bank Northern Rock as long as its depositors, the public purse and financial stability are not jeopardized, finance minister Alistair Darling said on Monday.
"It is in the interests of everyone that the situation with regard to Northern Rock is resolved as soon as possible," Darling said in a statement to parliament.
"It would be quite wrong to dismiss any option now without proper consideration as some suggest. I continue to believe it is right to use this time to explore the best outcome for the company and the public interest."
Earlier on Monday, the Treasury said it could offer extra help to any potential buyer of Northern Rock beyond February, when the emergency loan facility expires, after all bids for the mortgage lender so far were deemed too low.
But any such assistance would have to meet with European Union approval and
the government would prefer proposals that minimised any state involvement.
Darling said guaranteeing deposits at the bank, which suffered the first run on a British bank in more than 140 years at the height of the credit crunch in September, had so far cost the government nothing.
Experts have estimated that Northern Rock has borrowed 25 billion pounds through the Bank of England's emergency funding line, but Darling said it was right that the BoE should not publish the full details of its operations.
"To provide what would in effect be a running commentary on any operations would likely have adverse affects that none of us would want," he said.
Darling said that all lending was against adequate collateral and in return for the emergency facility, Northern Rock has agreed a number of controls including not declaring, making or paying any dividend without consent from the BoE.
It is also not allowed to make any substantial changes to its business.
"The Bank of England lending is secured against assets held by Northern Rock," Darling said. "These assets include high quality mortgages with a significant protection margin built in and high quality securities with the highest quality of credit rating. The Bank is the senior secured creditor."
"The Financial Services Authority has said before and continues to say that Northern Rock's main asset base, its mortgage book, is strong and sound."