Ad-Hoc Emergency Liquidity

United Kingdom: Northern Rock Emergency Liquidity Program, 2007

Announced: September 14, 2007

Purpose

To help the bank fund its operations amid ongoing market stress and, later, to enable it to explore strategic options

Key Terms

  • Announcement Date
    September 14, 2007
  • Operational Date
    September 14, 2007
  • Termination Date
    April 24, 2019
  • Legal Authority
    Memorandum of Understanding established in 1998 and updated in 2006
  • Administrator
    Bank of England and HM Treasury
  • Peak Authorization
    September 14 facilities: Limited only by the bank’s available collateral
  • Peak Outstanding
    GBP 28.5 billion was the highest figure reported, for December 31, 2007
  • Collateral
    September 14 facilities: unsecuritized residential mortgage loans, various securities; October 9 facilities: all assets of Northern Rock
  • Haircut/Recourse
    Haircuts for September 14 facilities
  • Interest Rate and Fees
    Unknown, premium to BoE’s official rate (then 5.75%)
  • Term
    Unknown
  • Part of a Package
    HM Treasury guaranteed all deposits and a number of other liabilities
  • Outcomes
    In 2012, HM Treasury sold the good bank to Virgin Money for GBP 747 million; in 2016, the NAO estimated a net gain of GBP 5 billion to the government after the intervention in Northern Rock, although not on a net present value basis
  • Notable Features
    Leak before announcement, deposit run after

Key Design Decisions

Purpose1

Part of a Package1

Administration1

Governance1

Communication1

Source and Size of Funding1

Rates and Fees1

Loan Duration1

Balance Sheet Protection1

Impact on Monetary Policy Transmission1

Other Conditions1

Key Program Documents

Key Program Documents

Key Program Documents

Key Program Documents

Key Program Documents

Key Program Documents

Taxonomy

Intervention Categories:

  • Ad-Hoc Emergency Liquidity

Countries and Regions:

  • United Kingdom

Crises:

  • Global Financial Crisis