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Chancellor blocked Northern Rock takeover

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by Kay Mitchell
”Chancellor

Mervyn King, the Bank of England Governor, said Chancellor, Alistair Darling, decided not to support a Northern Rock takeover bid during an interview with the BBC’s File On 4.

Mr King said Alistair Darling took the final decision not to support a move by Lloyds TSB to take over crisis-torn Northern Rock, saying it was ‘a matter for government’ When the Lloyds TSB bid collapsed in September, Northern Rock had to ask for emergency funding from the Bank of England

Lloyds TSB offered to rescue the bank before the crisis spiralled out of control, in return for a £30 billion loan from the Bank of England at competitive rates but this offer was rejected by Alistair Darling on the basis that the Bank does not usually ‘finance takeovers by one company for another, let alone £30 billion’.

In the interview, however, Mr King defended the Chancellor saying that in the days following the outbreak of Northern Rock’s crisis, he was extraordinarily successful in giving what reassurance he could give.

The Bank of England has been subject to criticism for not getting involved sooner, by either making it easier for Northern Rock to swap its mortgages for loans or by making more money available to the banking system as a whole. However, Mr King said his approach was the right one.

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News posted: November 7, 2007

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