A joint statement was issued today by HM Treasury, the Bank of England and the Financial Services Authority announcing that a liquidity facility will be available to help Northern Rock plc to fund its operations during the current period of turbulence in financial markets while Northern Rock works to secure an orderly resolution to its current liquidity problems.
The Financial Services Authority has said that the bank is solvent but was experiencing exceptional liquidity difficulties due to the severe tightening of the wholesale credit markets on which it relied for the majority of its funding. The liquidity facility will be available until its funding arrangements can be restructured.
Northern Rock's position arises from the financial system seizing up because of difficulties caused by problems in the United States sub-prime mortgage market.
Northern Rock (Guernsey) Limited is a wholly owned subsidiary of Northern Rock plc and provides retail funding to its parent. Its assets are substantially placements with the parent; it has no mortgages or loans to Guernsey residents
The Board of Northern Rock (Guernsey) Limited has received assurances from Northern Rock plc that its assets are safe and not at risk and that comfort can be taken from the Bank of England’s support. The local board has said savers and depositors can continue to transact as normal.
The Guernsey Financial Services Commission has been continuously monitoring the situation in recent weeks and is in close contact with the Financial Services Authority about the current situation of Northern Rock and with the Northern Rock (Guernsey) Limited Board and its parent. We will continue our involvement and take appropriate action if and when that becomes necessary.