The Bank of England has rejected claims by Northern Rock's chief executive, Adam Applegarth, that it caused the collapse of talks with a potential saviour for the firm by refusing to provide a funding facility.
The Bank of England said it refused a £30bn funding facility, reportedly to allow Lloyds TSB to take over the bank, because it could not accept demands to remove punitive lending penalties.
During a Treasury Select Committee meeting on Tuesday, Applegarth told MPs a takeover offer had collapsed when the Bank refused to offer a £30bn facility to help fund Northern Rock.
However, the Bank of England says the loan, which newspapers claim was requested by Lloyds TSB, was to stretch over one or two years and with no penalty rate, which the Bank says was unacceptable.
A statement from the Bank says: "The Tripartite Authorities were informed that a potential bidder wanted loans of up to £30bn over one to two years, without a penalty rate of interest, as part of the deal.
“The authorities, including the Bank of England, recognised the advantages of a takeover. They also agreed that in the circumstances it would be inappropriate to help finance a bid by one bank for another.”
The Bank is reported as saying it will continue to make facilities available for Northern Rock and any potential bidder at the penalty rate.
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First mentioned in Cridland Report
Second acquisition of 2019