Northern Rock, the UK mortgage lender that was nationalised earlier this year following a financial crisis, broke capital rules six months before its collapse, the Timesreported today, citing a review by the Financial Services Authority.
Northern Rock reported a capital ratio of 9.74 per cent at the end of March 2007, which was "in breach of its capital requirements," the Times quoted the FSA review as saying.
Northern Rock plugged the gap in June 2007 by selling an £833 million commercial mortgage book and issuing £328 million pounds in subordinated debt, the report said.
The breach came six months before Northern Rock was forced to seek emergency funding from the Bank of England after tightening credit conditions left it unable to raise money in the wholesale markets.