New Star's economist, Simon Ward, has estimated that the running total lent to the floundering bank now stands at approximately £10 billion.
This has been deduced from the 'other assets' section of the BoE's balance sheet which Ward has been scrutinising ever since the lender first announced it was heading into difficulties. It rose by a further £2.9 billion in the week to Wednesday 3 October, following a £4.9 billion gain in the previous week.
The miscellaneous section on the balance sheet has now increased by £10.7 billion since 12 September, just before the run on the troubled mortgage lender.
Ward said: "It is possible that some of these activities have contributed to the recent surge but the bulk of the increase is likely to reflect lending to the mortgage bank.
"There is speculation that the Bank has been providing covert support to other institutions facing funding difficulties but this would be at odds with recent evidence from Mervyn King, the Bank’s governor, to the Treasury Select Committee. In this he claimed that the Market Abuses Directive of 2005 prevented the Bank from conducting covert “lender of last resort” operations.
"The estimated £10 billion plus size of the Northern Rock loan compares with the Bank of England’s capital and reserves of £1.9 billion at 28 February, according to its latest annual report.
"The Bank’s capital arguably needs to be increased if it is to be expected to conduct emergency operations on the present scale."
