Bloomberg notes the following:
"The cost of overnight borrowing in pounds rose the most since June as the bailout of U.K. lender Northern Rock Plc stoked concern other home-loan providers will be forced to seek emergency funding.
The overnight rate banks charge to lend pounds soared 60 basis points to 6.47 percent today, the highest in more than a month, according to the British Bankers' Association. The three- month rate fell 7 basis points to 6.75 percent, the BBA said."
Northern Rock's share price is currently down 34% on the day.
The time has come for the Bank of England to:
1 Lower interest rates
2 Knock some heads together in the City, and ensure that the self imposed moratorium by banks on interbank lending is lifted
Should the Bank of England fail to loosen interbank liquidity, other banks will start to wobble. Bloomberg notes that Bradford & Bingley Plc and Alliance & Leicester Plc also rely more on financial markets than customer deposits to fund mortgages.
It is time for the Bank of England to get off the fence.