Call to secure Rock with ECB loan funding

Nov 23 2007 by William Green, The Journal

ALISTAIR Darling was urged yesterday to consider using cash from the European Central Bank to help Northern Rock.

Regional Euro-MP Fiona Hall has written to the Chancellor asking why funding from the European Central Bank (ECB) was not explored months ago as it makes loan facilities available to companies in the European single-currency zone – which would apply to Northern Rock as it has a branch in Dublin.

The Liberal Democrat said an application to the ECB’s 240bn (£172bn) reserve could have been made at an early stage and any interest could be at a much lower rate than the 7% being charged by the Bank of England.

“A loan from the ECB would also avoid any question of the UK Government falling foul of European Union state aid rules which do not allow Governments to prop up or unfairly advantage private firms. I believe a loan from the ECB could ease the burden currently being shouldered by UK taxpayers and at the same time help to secure thousands of jobs, plus the wider economic benefits that Northern Rock has brought to the North-East,” she said.

The Treasury said it was a matter for Northern Rock whether it made an approach to the ECB. The bank said it now had the Bank of England facility.

Northern Rock chief executive Adam Applegarth told MPs last month it would have taken two or three months to complete legal documents and provide collateral through the Irish branch to approach the ECB.

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‘We are in limbo. We just don’t know what is going to happen’

THE stress and worry the Northern Rock crisis is causing people in the North-East has been highlighted by the wife of one employee.

The woman, called Jules, from Newcastle, said her husband worked for the bank, and called a radio phone-in to speak about her fears for her family’s financial security.

She said: “I am physically sick. My son has just gone away to university. We are in limbo. We just don’t know what is going to happen.

“I am really angry at how it has been handled. No one seems to be delving into how the directors of this company have got into this mess.

“It’s their fault, basically. Whoever manages to dig us out of it, nobody seems to question which of these big men made the plan and who let them get away with it.

“It’s all the City big boys in London trying to make a fast buck. It hits home how there is a North-South divide. We are really worried about it.”

When asked whether she was worried about her husband’s job, she said: “It hits us in waves, yes. Now and again I think it can’t happen, and it shouldn’t happen. It should not happen – that’s why it is so annoying.”

Unite deputy general secretary Graham Goddard said: “Over two months of speculation about the future of Northern Rock has left employees feeling insecure about their jobs.

“As well as the protection of employee terms and conditions, Unite is seeking assurances about the long-term security of the Northern Rock Foundation.

“We will be looking for any future stakeholders within Northern Rock to sign up to the Unite Charter and to retain the bank as a UK listed company.”

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Nationalisation danger claim

NATIONALISING Northern Rock could produce great dangers for the public purse, a minister says.

Lord Davies of Oldham, Lords Deputy Chief Whip, issued the warning amid criticism of the handling of the bank’s difficulties.

Liberal Democrat Lord Newby said the Financial Services Authority had been too dilatory in monitoring Northern Rock, and the Bank of England had moved too slowly.