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Context of 'September 12, 2007: Governor Says Bank of England May Give Banks Emergency Loans'

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Mervyn King, governor of the Bank of England, is first alerted to the problems at the troubled British mortgage giant Northern Rock. [Daily Telegraph, 2/26/2008] In a phone call with officials at the Financial Services Authority (FSA) and the Treasury, he is told about the potential impact of the global credit crunch on Northern Rock’s business. [BBC, 8/5/2008]

Entity Tags: Her Majesty’s Treasury, Financial Services Authority, Mervyn King, Northern Rock plc, Bank of England

Timeline Tags: Global Economic Crises

Governor of the Bank of England Mervyn King writes to the Treasury Select Committee about current problems on financial markets. He tells it that the Bank will be prepared to provide emergency loans to any commercial bank that runs into short-term difficulties, provided this is because of temporary market conditions. However, he appears to rule out following the lead of the European Central Bank and US Federal Reserve in pumping huge sums into the banking system to ease problems with liquidity. [BBC, 9/13/2007; BBC, 8/5/2008]

Entity Tags: Bank of England, Mervyn King

Timeline Tags: Global Economic Crises

The Bank of England says it will inject £10 billion ($20 billion) into the money markets to try to bring down the cost of inter-bank lending. The move is prompted by the financial crisis, which has recently engulfed leading British bank Northern Rock. One week ago, Bank of England governor Mervyn King had said the Bank would not make such an injection (see September 12, 2007). [Daily Telegraph, 2/26/2008; BBC, 8/5/2008] “This represents a U-turn on support for money markets,” says Ian Kernohan, an analyst at Royal London Asset Management. He adds, “As every parent knows, it’s all very well to talk tough, but if you don’t follow up your credibility is damaged.” Calyon analyst Daragh Maher says: “Only one week ago, governor King was arguing against providing liquidity to money markets as this would risk causing greater problems further down the road. This strategy has come in for considerable criticism… [and the change announced today] will of course open it to further criticism that its earlier strategy was flawed and that this shift may be too little too late.” [Agence France-Presse, 9/19/2007]

Entity Tags: Ian Kernohan, Mervyn King, Bank of England, Daragh Maher

Timeline Tags: Global Economic Crises

Governor of the Bank of England Mervyn King defends his handling of the banking crisis that has recently hit mortgage giant Northern Rock to members of parliament. Facing accusations of “being asleep at the wheel,” King says it would have been “irresponsible” to have intervened earlier to save Northern Rock. He also says that he would have liked to have offered financial support to the company in secret but that British and European regulations made this impossible. [BBC, 8/5/2008]

Entity Tags: Bank of England, Northern Rock plc, Mervyn King

Timeline Tags: Global Economic Crises

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