Customers queue to enter a branch of British bank Northern Rock PLC in Croydon, south London. (Sang Tan/AP Photo)De International Herald Tribune bericht:
Global credit crunch reaches new dimension
LONDON: A bailout of a big British mortgage bank caused shudders among account-holders and investors alike Friday, opening a new phase in the global financial turmoil that emanated from a shakeout in the U.S. home lending business, analysts said.
Depositors flocked to withdraw money after the bank, Northern Rock, unable to raise funds from its usual sources - capital markets - because of the global credit crunch, turned to the Bank of England for an emergency loan. Northern Rock shares plunged more than 30 percent, prompting a broader sell-off in European stock markets.
While other European banks have gotten burned by investments tied to shaky U.S. mortgages, known as subprime, Northern Rock said it had only a small subprime exposure in its portfolio. Instead, the bank ran into trouble because the credit squeeze undermined its business model. Northern Rock relies heavily on raising money in the capital markets, rather than consumer deposits, to finance its mortgage lending.
"The problems are potentially much wider now," said Jonathan Loynes, an economist at Capital Economics, a consultancy in London. "This means we have to worry about a wider range of institutions that aren't directly involved in this credit crisis but are in a way innocent bystanders."
The British government said it had authorized the Bank of England to provide a "liquidity support facility" of unspecified size to Northern Rock, based in Newcastle, England, which has expanded aggressively in recent years.
The news prompted a sell-off in the shares British banks as investors worried about the possibility of similar problems at other institutions - as well as threats to the broader economy. The FTSE 100 index was down more than 2 percent at midday but recovered to close down 1.17 percent. Shares elsewhere in Europe fell less sharply.
"I don't think the worst is behind us," Jean-Claude Juncker, who chaired a meeting of European finance ministers and central bankers Friday, said during a news conference in Porto, Portugal, Reuters reported.'
Lees verder: http://www.iht.com/articles/2007/09/14/news/mortgage.php?WT.mc_id=newsalert
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