NORTHERN Rock has become the highest-profile UK victim of the global credit decline, triggered by the sub-prime mortgage crisis in the US.

Q - Why does the Northern Rock need help from the Bank of England?

A - The firm needs to secure access to a greater flow of cash so that it can continue its business.

Unlike most banks, which get their money from customers making deposits into savings accounts, Northern Rock is built around its mortgage business.

It raises most of the money which it provides for mortgages via the wholesale credit market - primarily by selling the debt on in the form of bonds.

Following the widespread losses made by investors in loans to US homebuyers with poor credit history, the so-called sub-prime loans, banks and investors who have had their fingers burned have become wary of buying any mortgage debt, including Northern Rock's.

Therefore, it is not seeing the flow of money that it would normally enjoy - and needs to keep its business going.

Q - Northern Rock customers were said to be withdrawing money in their droves yesterday. Is there reason to panic?

A - Experts say that Northern Rock is still a profitable and viable business and that there is little prospect of it going bust.

People who have saving accounts with Northern Rock probably don't need to panic, the British Bankers' Association said.

The message from the Government and others is that the very fact that the Bank of England has agreed to provide emergency funding was an indication that it believed the problems at the Northern Rock were temporary.

Q - Is Northern Rock more susceptible to problems than others?

A - Given the lack of credit available on world money markets, all banks are having greater than normal difficulties in getting funding.

However, as a specialist mortgage lender, Northern Rock has struggled more than most.

Q - What does it mean for Northern Rock as a business?

A - In the short term, it means it is borrowing money at a rate well above the market rate - essentially a financial penalty for getting itself into this position.

The bank will also be lending much less to new home buyers in the coming months, as it restricts fresh mortgage offers to its customers.

"We have taken prudent action to rein back our lending until markets normalise," said its chief executive Adam Applegarth.

In the longer-term, some are predicting that Northern Rock may look to be bought by a larger company.

Q - What about the customers of other banks?

A - People with poor credit history will find it increasingly difficult to get a loan or mortgage - or may have to pay more for it.

And some banks may have a bumpy ride themselves, although the Treasury and the Bank of England have promised to help every bank hit by the credit crunch - as long as the underlying business is safe and sound.

Q - Is it common for a firm to have to turn to the Bank of England?

A - No. This move is extremely rare, which is what makes it such big news.

It is thought that the Bank of England last acted as a "lender of last resort" to a bank in the 1970s, and the decision has been made after consultation with the Treasury and the City watchdog, the Financial Services Authority.

On its website, the Bank of England says that it would expect to take such a step "very rarely" and it "would normally only be undertaken in the case of a genuine threat to the stability of the financial system to avoid a serious disturbance in the UK economy".

Q - Was this situation expected?

A - There has been concern for some weeks in financial circles about Northern Rock's position and problems it may face.

However, most agree that for things to have become this bad is still a big surprise.

Earlier this week, the Governor of the Bank of England, Mervyn King, told the Treasury Select Committee that the Bank would be prepared to provide emergency loans to a bank that ran into difficulties, so long as those difficulties were the result of temporary market conditions.

Q - What is happening to Northern Rock's shares?

A - The firm's shares have already fallen in value by about 50 per cent this year, including losing about five per cent on Thursday, and suffering a steep decline yesterday.