Northern Rock 'loans top £10bn'

Northern Rock may have borrowed a further £2.9bn from the Bank of England in the past week.

The extra loans, which would take its total borrowing over £10bn, appear in the "other assets" category on the Bank of England's weekly accounts.

Analysts say it is extremely unlikely that the money has been lent to another bank because the Bank of England would have to disclose any new borrower.

The Bank of England and Northern Rock declined to comment.

Accounts from the bank state that "other assets", which includes any funds the Bank uses as "lender of last resort" climbed £2.9bn over the past week.

"Other assets" have risen £10.7bn since 12 September, which was just before the run on Northern Rock began.

Shares in the firm rose 7% on Thursday on reports of increasing interest from those seeking to buy the firm.

Speculation is mounting that Citigroup might be prepared to back a takeover of the firm.

Reports earlier in the week said the US private equity group JC Flowers had set aside £15bn to buy the bank.

But Northern Rock's charitable arm, which controls 15% of the bank's shares, has written to ministers, expressing worries about any possible takeover.

Savings

Northern Rock had to ask the Bank of England for emergency funding in September following a global credit crunch.

Even though the firm's business itself was sound, the bank depended on short-term credit to run its day-to-day operations.

The firm approached the Bank of England for help, as the credit markets contracted.

But on hearing about the emergency funding, customers withdrew billions of pounds of savings.

The run on the bank was calmed only once the government pledged that savings would be guaranteed.