I presume its down to people not being able to pay back loans and mortgages due to a lavish lifestyle and the fact everybody is lending and interest rates have gone up and up.
I have a loan with them
never missed a repayment yet.Northern Rock gets bank bail out
- Thread starter cheets64
- Start date
I presume its down to people not being able to pay back loans and mortgages due to a lavish lifestyle and the fact everybody is lending and interest rates have gone up and up.
I have a loan with them
never missed a repayment yet.
I presume its down to people not being able to pay back loans and mortgages due to a lavish lifestyle and the fact everybody is lending and interest rates have gone up and up.
I have a loan with them
Same happened with another bank while ago, its common place
http://forums.overclockers.co.uk/showthread.php?t=17773532&highlight=bank+bailed
More to do with the fact that because of the recent subprime crisis and the fact that Northern Rock have a significant amount of subprime business none of the other banks want to lend them money so they have to go to the BoE to get it.
After big losses today it doesn't look like tomorrow will be any better on the stockmarket for them!
The Barclays thing was basically a ****-up which left them short of cash at the end of the day.
Northern Rock have had to do this as they were unable to source the cash from elsewhere, a bit different.
IMHO it all depends on how long the liquidity crisis continues, if the banks are still lending to each other at the current rates by the end of the year then I can see 2008 not being particularly great.
I think the biggest thing at the minute is the uncertainty of the whole thing in that no-one knows who is at risk from all this.
If a couple of big financial firms go under then it will spook everyone for a long time.
EDIT: Good explaination of things on Newsnight at the moment, comparing it to a meat pie factory
Last edited:
EDIT: Good explaination of things on Newsnight at the moment, comparing it to a meat pie factory
Yummy
Ouch. That's gonna hurt a LOT of people. Not just Northern Rock. But expect them to be a takeover target anytime, well, now, really.....
Normally banks have in place what are known as "Commitment Facilities" with other institutions to avoid this kind of thing happening.
A CF basically works that, the borrower (Northern Rock in this case) can borrow up to a fixed amount (set int he original contract) at a fixed rate of interest (set at the time of the borrowing) on demand. Under the terms of the Facility, the Lender is obliged to give the loan on demand from the Borrower. Normally this would be done with about 1 hours notice.
In return the Borrower pays a % fee to the Lender based on the un-drawn amount.
So lets say Bank A has a £500m facility with Bank B. On demand, Bank A can ask Bank B to lend them any amount up to £500m on demand. Bank B are contractually obliged to do it.
If Bank A doesn't borrow anything, it pays a fixed fee (say 0.125% for example) on the undrawn 500m, ie 500m x 0.125%.
Lets say Bank A borrows £200m, it then pays interest - normal market interest rates - on the £200m borrowed and the standard 0.125% on the 300m not borrowed.
So the fact Northern Rock have got as far as the BoE means they've *really* exhausted their funding options both on the market and in terms of their commitment agreements.
It might well only be temporary, but it does show NR haven't arranged their funding and hedging well enough to protect themselves in even the short term (<12months), never mind the mid (12m - 5 years) and long (5 years+) term.
Ouch.
Real, big, ouch.
Normally banks have in place what are known as "Commitment Facilities" with other institutions to avoid this kind of thing happening.
A CF basically works that, the borrower (Northern Rock in this case) can borrow up to a fixed amount (set int he original contract) at a fixed rate of interest (set at the time of the borrowing) on demand. Under the terms of the Facility, the Lender is obliged to give the loan on demand from the Borrower. Normally this would be done with about 1 hours notice.
In return the Borrower pays a % fee to the Lender based on the un-drawn amount.
So lets say Bank A has a £500m facility with Bank B. On demand, Bank A can ask Bank B to lend them any amount up to £500m on demand. Bank B are contractually obliged to do it.
If Bank A doesn't borrow anything, it pays a fixed fee (say 0.125% for example) on the undrawn 500m, ie 500m x 0.125%.
Lets say Bank A borrows £200m, it then pays interest - normal market interest rates - on the £200m borrowed and the standard 0.125% on the 300m not borrowed.
So the fact Northern Rock have got as far as the BoE means they've *really* exhausted their funding options both on the market and in terms of their commitment agreements.
It might well only be temporary, but it does show NR haven't arranged their funding and hedging well enough to protect themselves in even the short term (<12months), never mind the mid (12m - 5 years) and long (5 years+) term.
Ouch.
Real, big, ouch.
You ever been on moneysavingexpert.com go to the forums and debt board, its disgusting, people in £25k debt on credit cards and nothing to show.
But then there's the adverts on telly painting a rosy picture about how people can get out of debt, and "even have enough money left over for that holiday you've been wanting".
The money isn't left over, it's money you don't have!
Aye, crazy, someone woman posted in that thread £30k of credit card debt single parent and 3 kids, beggars belief what the money went on.
edit didn't see your post gumbald
I feel sorry for some of them but then I think they just bought things on credit they didn't and couldn't afford and me feeling sorry for them goes out the window, some people on there are genuinely in debt with failed business/break ups/
Last edited:
See above I don't know shares are not as stable as they use to be