Northern Rock shareholders are demanding a public inquiry into the dramatic leaking last September of the stricken lender's pleas for emergency funding from the Bank of England. Small investors in the bank say the way in which the mortgage lender's troubles came to light played a major part in its subsequent collapse and was in stark contrast to the tight secrecy surrounding the Bank's current liquidity operation to prop up the banking system.
The shareholders' call for a probe was given additional urgency yesterday as Northern Rock announced it had started a consultation with unions about its plan to shed 2,000 jobs, or about a third of the bank's workforce, across all levels of staff.
The Northern Rock Shareholder Action Group has written to the Chancellor, Alistair Darling, calling for a probe into the leak, which prompted savers to queue outside the bank's branches and bombard its website to get their money out. The letter has been copied to the Prime Minister, the Governor of the Bank of England and the chief executive of the Financial Services Authority.
The letter, from Roger Lawson, chairman of the Northern Rock Shareholder Action Group, said the authorities were to blame for the mishandling of the announcement, which led to nationalisation and losses for shareholders.
"I believe that it is highly desirable and in the public interest that the culprit is identified and in doing so a strong message will be sent out to all those involved in the new scheme that the Government will act on its threat to take court action," Mr Lawson wrote.
The Bank of England announced its radical asset-swap facility last week, allowing lenders to exchange illiquid securities for Government bonds. To guard against any perceived stigma of a bank using the facility, the Bank has threatened severe action against anyone who reveals the names of participants. The central bank has also refused to give a figure for how much of the open-ended facility has been used until it closes in six months' time.
The job cuts at Northern Rock will be made by the end of 2011 but most jobs will go this year as Ron Sandler, the bank's executive chairman, cuts the size of the bank to match its reduced lending capacity under nationalisation. Unite, the main union representing Northern Rock employees, demanded that all redundancies should be voluntary.Reuse content