Northern Rock became the first high profile British victim last night of the credit crunch, after admitting that it has received a financial bail out from the Bank of England. The Independent. The Times. The Daily Telegraph

The Bank of England, with the consent of the Financial Services Authority and the Treasury, is providing an emergency facility, at a penalty rate of interest.

The lifeline comes only two days after the governor of the Bank, Mervyn King, declared ‘the provision of large liquidity facilities penalises those financial institutions that sat out the dance, encourages herd behaviour and increases the intensity of future crises’.

This is thought to be the first such rescue since the secondary banking crisis of the mid-1970s.

Sources stress that the Newcastle-based mortgage bank had suffered a ‘liquidity’ rather than a ‘solvency’ crisis, and that depositors' funds were entirely safe.