ECB pumps out €3.9bn as banks feel strain

Northern Rock may have already borrowed as much as £7.75bn from the Bank of England's emergency funding facility, analysis of the Bank's weekly balance sheet revealed last night.

This is more than double the amount of a week ago and suggests the troubled Newcastle-based mortgage bank is continuing to struggle to finance itself in the money markets. Northern Rock is obliged to pay an undisclosed penalty rate of interest on the Bank's "lender-of-last-resort" facility.

Earlier this week, Northern Rock directors were embarrassed into abandoning the planned payment of an interim dividend after MPs had expressed outrage that a bank which had borrowed so heavily from the taxpayer could contemplate paying shareholders anything.

Northern Rock's use of emergency Bank of England support now amounts to more than a third of its retail deposit base. One source close to Northern Rock accused rival banks of deliberately refusing to lend to the stricken bank in the hope of driving it out of business.

The size of the loan drawdown is revealed in published figures which show the Bank expanded its assets by 3 per cent last week.

Simon Ward, senior economist at the fund management group New Star, said that assets had grown to £14.3bn, of which £7.75bn is classified under "other assets", a category that is likely to include the Bank's "lender-of-last-resort" support to Northern Rock.

These assets showed limited variation before the surge which coincided with the Northern Rock debacle, so it is reasonable to assume the two are related.

Mr Ward said: "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."

Northern Rock is obliged to deposit the collateral represented by its loan book against any borrowings with the Bank, which is why the monies show up as "assets" in the Bank's accounts.

Northern Rock shares rose 6.3 per cent to 193.5p yesterday as a number of short sellers struggled to find stock to close their positions. Takeover interest from rival banks has been dampened by the likely need to refinance tens of billions of pounds worth of mortgages in the markets over the months ahead.