Old Lady rescues bank in pounds 1 takeover

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THE BANK of England has bought the National Mortgage Bank for pounds 1 from National Home Loans, the first time it has taken a troubled bank under its own wing since Johnson Matthey Bankers in 1984 - also bought for pounds 1, writes Peter Rodgers.

The deal is a legacy of a support operation nearly three years ago, when the collapse of BCCI led to a run on several small banks. NMB joins Slater Walker, the failed 1970s fringe bank, and Minories Finance, the renamed JMB, on the Bank's balance sheet.

The Bank of England guaranteed a pounds 200m loan from the clearing banks to keep the banks afloat. NMB is the last in the lifeboat, and its guarantees were replaced by a direct loan from the Bank - pounds 360m at the end of last year.

The Bank said the purchase 'changed the form of the Bank's support, not the substance'.

NHL made a pounds 75m write-off of the whole of its banking subsidiary's capital at the time of the rescue. The Bank of England has already provided pounds 105m for losses on loans to rescued banks, the largest part of which was due to NMB.

The Bank added that the takeover would allow it to continue to exercise close control over the rundown of NMB under the chairmanship of Ian Hay Davison with a view to maximising recoveries.