Congdon, Tim Goodhart, Charles A.E. Eisenbeis, Robert A. Kaufman, George G. Hamalainen, Paul Lastra, Rosa M. Llewellyn, David T. Mayes, David G. Wood, Geoffrey Milne, Alastair Onado, Marco Taylor, Michael
Year of Publication:
SUERF Studies 2009/1
In August 2007 the United Kingdom experienced its first bank run in over 140 years. Although Northern Rock was not a particularly large bank (it was at the time ranked 7th in terms of assets) it was nevertheless a significant retail bank and a substantial mortgage lender. In fact, ten years earlier it had converted from a mutual building society whose activities were limited by regulation largely to retail deposits and mortgages. Graphic television news pictures showed very long queues outside the bank as depositors rushed to withdraw their deposits. There was always a fear that this could spark a systemic run on bank deposits. After failed attempts to secure a buyer in the private sector, the government nationalised the bank and, for the first time, in effect socialised the credit risk of the bank. It is now a fully state-owned bank...
Northern Rock retail banking mortgages nationalisation bank failure United Kingdom LPHI risk lender of last resort deposit insurance market discipline Countrywide IndyMac United States deposit guarantees supervisory failure bank regulation return on equity business model securitisation financial regulation financial stability crisis management banking law insolvency emergency liquidity assistance cross-border bank insolvency moral hazard penalty rates teaser rates capital-asset ratios Basel I Basel II