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FSA reiterates Northern Rock solvent

LONDON
Sat Sep 15, 2007 5:41pm EDT

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The sign of the Northern Rock bank is seen outside a branch in central London September 14, 2007. The Bank of England has offered an emergency loan to Northern Rock after the mortgage lender became the biggest British casualty of the credit squeeze sparked by the crisis in the U.S. subprime mortgage market. REUTERS/Dylan Martinez

LONDON (Reuters) - The country's financial watchdog reiterated on Saturday that it considers mortgage bank Northern Rock to be solvent and that problems customers are facing in withdrawing money are not linked to its financial health.

Shares in Northern Rock plunged on Friday, and customers clamoured to withdraw money, after the bank agreed an emergency loan from the Bank to cope with a lack of liquidity and high interest rates in money markets.

"The FSA reiterates that it judges Northern Rock to be solvent and that savers can continue to deposit and withdraw funds," the Financial Services Authority (FSA) said in a statement.

"Clearly, there have been some operational problems with queues at some branches and difficulties with the bank's website caused by the unusually high volumes of customers trying to access their accounts as a result of the publicity surrounding Northern Rock.

"These problems are entirely logistical and are in no way related to the bank's solvency or its underlying ability to deliver funds to savers who wish to withdraw."

FSA Chairman Callum McCarthy added: "To be absolutely clear, if we believed that Northern Rock was not solvent, we would not have allowed it to remain open for business."


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