CASE STUDY: NORTHERN ROCK

摘要

At the start of 2007, Northern Rock was one of the success stories of the UK financial sector. Its pre-tax profits were up 27 per cent on the previous year, marking 10 years of growth since its conversion from a building society to a bank. Lending had been funded from the wholesale markets rather than retail deposits, with loans bundled together and sold to investors. However, reliance on wholesale funding made the bank vulnerable.rnCentral bank action in response to a perceived housing bubble meant thatrninterest rates soared. As a result, Northern Rock's share price fell and there was a profit warning. The situation grew worse that August when the global liquidity freeze starved the bank of cash -and worse still when liquidity markets dried up altogether. Northern Rock warned its regulator that it was in trouble and - rather than use the Bank of England as lender of last resort - it was decided to find a buyer for the bank. A potential sale fell through, and the decision was taken to provide emergency funding, but newsrnleaked out and the government had to respond immediately with a public statement.