Northern Rock may have received another bailout from the Bank of England, according to New Star economist, Simon Ward.
Last week, Ward claimed the Bank of England’s weekly balance sheet indicated Northern Rock’s original loan was worth around £2.9bn.
The balance sheet has grown significantly in the past two weeks, with an increase of 13% seen last week. Ward says of the £11.3bn added to the balance sheet last week, £8.4bn was to provide liquidity to the markets. The remaining amount, classified as ‘other assets’ was likely to be the loan to Northern Rock, according to Ward.
The latest balance sheet data shows a further increase of 3%, or £14.3bn, which Ward says is likely to be due to further borrowing by Northern Rock. The amount of money put out to provide liquidity now stands at £6.5bn, while the ‘other assets’ category has grown to £7.75bn above normal levels.
Ward comments: “’Other assets’ showed limited week-to-week variation before the recent surge. It is possible that other undisclosed activities have contributed to the increase, but the latest figures will fuel speculation that the Bank has been forced to extend massive support to the troubled mortgage lender.”
Last week, Northern Rock declined to comment on Ward’s speculation and a Bank of England spokesman said the balance sheet was a complex document and was often difficult to read.
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