September 19, 2007 (LPAC)--Despite a "unlimited credit line" from the Bank of England, the share price of the British Northern Rock Mortage bank plunged another 20% today. Meanwhile Northern Rock is being seen as about to draw on the extraordinary unlimited credit facility extended to them by the Bank of England (BoE) last week. One of the bank's funding vehicles, a "conduit" called Granite 07-3, holds 5 billion pounds in residential mortgage backed securities (MBS), which Northern Rock claims it can use as collateral for drawing on the BoE credit facility: "The Granite 07-3 issue was repurchased by Northern Rock. If required, these notes can be utilized as eligible repo collateral for the purchase of drawing on the Bank of England facility," a statement by Northern Rock stated.

The move follows the fact that as much as 4 billion pounds of Northern Rock's 24 billion pounds worth of deposits have been withdrawn in the run on the bank which began last Friday.

Following the BoE announcement that it would guarantee deposits, panic withdrawals have somewhat subsided, but Ambrose Evans Pritchard of the Daily Telegraph reports that the European Union might challenge the bailout as a breach of EU laws. A spokesman for Neelie Kroes, competition commissioner and well known Thatcherite, said that they are "monitoring the situation" because it might violate competition laws.

NR announced that they plan to go ahead with a 60 million pound dividend to investors, despite the collapse. Liberal Democratic Party Treasury spokesman, Vince Cable said it was "outrageous" that the government's guarantee for savers was also extended to shareholders and directors who had "run the risk of collapse. He called for the NR's CEO, Adam Applegarth to be sacked.

One city source is quoted in today's Guardian as saying that shareholders will be asking for the heads of a few of the bank's directors.