大象传媒

The Rock and me

• Robert Peston
• 16 Oct 07, 04:11 PM

At 8.30pm on September 13, I disclosed on 大象传媒 News 24 that Northern Rock had approached the Bank of England for emergency financial support 鈥� and then spent the rest of that evening elaborating on that scoop in reports for the Ten O鈥機lock News, radio bulletins, 大象传媒 online and so on.

Since then, I have been criticised by readers of this blog and others for being in some way being responsible for the run at Northern Rock, which began the following morning.

I鈥檝e not responded to the criticism, largely because it goes against the grain to write about my stories. As a journalist, I broadcast and write about things in the world that seem to me to be important, not about myself.

But since the chairman and chief executive of Northern Rock both told the Treasury Select Committee that they believed the 鈥渓eak鈥� to me had exacerbated the woes of their bank, I felt I could no longer keep schtoom.

The first thing to say is that I cannot possibly know whether anyone decided to take their money out of Northern Rock as a direct result of seeing my broadcasts.

But here are a few thoughts that seem to me to be relevant:

1) I was in a position to broadcast many hours before I actually did that the Bank of England, in its role as lender of last resort, had been approached for help by the Rock. The reason I held off was because I wanted to ascertain whether Northern Rock was insolvent 鈥� whether its loans were bad 鈥� in addition to having got itself into the parlous state of finding it impossible to finance itself in the normal way.

Having been given the assurance that there was nothing seriously wrong with Northern Rock鈥檚 loan book, I then felt able to broadcast. Why? Because I was then able to give appropriate context to the story. I was able to say that there was both bad news and good news. The bad news was that Northern Rock had committed a cardinal sin for a bank, which was that it had failed to ensure that its sources of funding would continue in all market conditions. But the better news was that with the Bank of England stepping into the breach, depositors ought not to lose any money.

I鈥檝e reviewed our broadcasts of the night of September 13. And if I have any doubts about what I said it is that 鈥� in the light of the subsequent run on the bank 鈥� I may have given too much reassurance to depositors rather than too little. Because, as the governor of the Bank of England, Mervyn King, has pointed out, it was rational for depositors to remove their funds.

2) This was a story I had been working on for weeks, if not years. I first about Northern Rock鈥檚 business model in July 2003, when I was City editor of the Sunday Telegraph. And when money markets seized up on August 9, I 鈥� and other journalists, and many in the City 鈥� identified Northern Rock as being vulnerable. For example, Numis, the stockbroking firm, in mid-August stopped giving any kind of recommendation on the Rock鈥檚 shares, because it felt unable to value the company while there were doubts about how it was going to raise finance.

And on August 16, in my blog, I wrote that Northern Rock was 鈥渢he stock to watch鈥� because it was 鈥渉eavily dependent on funding from the bond market鈥�.

I took my own advice. I watched what was happening to this bank closely, because of the likelihood that it would generate news of a substantial nature.

Also, as Adam Applegarth, the chief executive of Northern Rock, pointed out today, vast numbers of bankers, officials, regulators and corporate advisers knew both that Northern Rock had run into serious difficulties and that it was approaching the Bank of England for succour. In other words, it was immensely unlikely that the Rock would be able to keep its plight secret.

In those circumstances, it is extraordinary that it and the Bank of England started the detailed negotiations on the terms of the emergency loan on September 13 (though it wasn鈥檛 signed off till the early hours of September 14) with a view to announcing what had happened the following Monday, September 17. How could it possibly believe it could keep the news out of the public domain all through the Friday and the weekend?

What鈥檚 more, the Rock formally told the Bank of England it needed to tap it for help on September 10, the Monday. It almost beggars belief that the Rock and the Bank thought they could keep a lid on what was going on till a full week later.

3) Of course I understand that Northern Rock and the authorities feel that if they had made the announcement of the Bank鈥檚 support in their own time and in their own way, depositors might not have quite been so alarmed. But none of them are actually claiming that the run would not have happened. Because when they ask themselves whether they would have kept their savings in a bank which had been forced to ask the Bank of England for emergency help, they know what the answer is.

• Permalink
• Comments