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Context of 'January 21, 2008: British Treasury Announces Plan to Convert Emergency Loans to Troubled Bank into Bonds; Plan Will Not Be Implemented'

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British Chancellor Alistair Darling is informed of “quite substantial problems” at the troubled British mortgage giant Northern Rock. The notification comes from Sir Callum McCarthy, chairman of the Financial Services Authority. [Daily Telegraph, 2/26/2008]

Entity Tags: Alistair Darling, Financial Services Authority, Callum McCarthy

Timeline Tags: Global Economic Crises

British Chancellor Alistair Darling intervenes in the crisis surrounding the troubled British mortgage giant Northern Rock. A run on the bank began three days ago (see September 14, 2007) and shows no sign of abating, as there are still queues outside a number of branches. Amid a further slide in the company’s share price and fears the run will undermine confidence in the whole banking system, Darling issues a statement saying the Treasury will guarantee all deposits held by Northern Rock. He says savers will not lose a penny and that his action is motivated by the “importance I place on maintaining a stable banking system.” The move appears to work and the queues outside branches will subside the next day. [Daily Telegraph, 2/26/2008; BBC, 8/5/2008]

Entity Tags: Alistair Darling, Her Majesty’s Treasury, Northern Rock plc

Timeline Tags: Global Economic Crises

British Chancellor Alistair Darling announces a plan to sell government-guaranteed bonds worth about £25 billion ($50 billion) to help the sale of stricken mortgage giant Northern Rock to a private investor. The proceeds from the sale of the bonds would be used to pay off emergency loans the bank has taken out from the Bank of England. The British treasury thinks the bonds would speed up a private sale of the troubled lender. Although Northern Rock shares rise by about 42 percent on the news, the bank will be nationalized the next month and the bonds will not be issued. [Daily Telegraph, 2/26/2008; BBC, 8/5/2008]

Entity Tags: Alistair Darling, Her Majesty’s Treasury, Northern Rock plc

Timeline Tags: Global Economic Crises

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