Rock borrowing - the facts
You’ll have read around the place this morning that Northern Rock has now borrowed almost £30bn from the Bank of England.
That’s wrong. The Rock has in fact borrowed just over £25bn from all of us in the form of taxpayer-backed loans.
How do I know? Errr. Well I’ve been told by a couple of people I trust.
But it would be equally wrong to point fingers at the journalists who have printed the inflated erroneous number.
Because they have done a perfectly sensible calculation.
More importantly, the Bank of England – as a point of principle – is refusing to correct or guide journalists. And the Rock has been prohibited by the Bank from correcting them.
One Rock executive said to me that there was absolutely nothing he or his colleagues could do to prevent the press reporting exaggerated numbers on the Rock’s borrowing from taxpayers.
Why won’t the Bank of England be more helpful?
That’s very unclear.
But you may be able to draw your own conclusions if I explain how journalists have been obtaining these numbers.
The first thing to do is click on this link.
That takes you to a page on the Bank of England’s website called the Bank Return.
On that page the bank’s weekly balance sheet is published.
Now click on the Banking Department’s balance sheet for September 12 – or the day before the Rock went cap in hand to the Bank of England for emergency help.
In the bottom right hand corner is a category of assets called “other assets” – and its value is £13.1bn.
Now click on the Banking Department’s balance sheet for November 28. There you’ll see that the value of “other assets” has shot up to £42.3bn.
What we know is that the Rock loans are in that category of asset.
And if you assume – which is what journalists have done – that all the increase in the value of that asset is represented by Rock lending, then current Rock lending by the Bank of England would be £42.3bn minus £13.1bn. Which is £29.2bn.
But it’s a false assumption.
There were other kinds of loans in that “other assets” category before the Rock debacle and there are other kinds of loans now.
So not all the increase is down to the Rock.
But what are those loans?
Well, I haven’t a clue. And the Bank of England won’t say.
Inevitably, its silence has fuelled the conspiracy theories, even within the Rock itself – whose executives have persuaded themselves that other banks must be in receipt of secret emergency help from the Bank of England, which somehow it has managed to keep quiet.
It seems unlikely to me that would be the case.
But I can’t be certain because the Bank of England won’t say.
It’s all a bit odd and troubling.