LONDON, Sept 13, 2007 (AFP) – The Bank of England has agreed to provide emergency funding to mortgage lender Northern Rock after it fell victim to the liquidity squeeze in the banking sector, media reports said on Thursday. In an interview with the Telegraph published on Thursday, Chancellor of the Exchequer Darling said that in “crude terms, they need to know who they’re lending to, how much they’re lending and what the risk is.”
According to the BBC and the Financial Times newspaper, Britain’s fifth-biggest mortgage lender has struggled with lending since a credit market squeeze over the summer after concern sparked by uncertainty in the US subprime mortgage sector.
They said that the Bank of England (BoE), Britain’s central bank, had agreed to provide short-term lending to Northern Rock to help it see out the crisis in what the FT described as the most dramatic development in the UK banking market since the crisis began.
The reports said that the decision was made following consultation with Britain’s finance ministry and the Financial Services Authority, the sector’s regulator.
The finance ministry refused to comment, saying that the issue was “commercially sensitive.”
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