Lessons from the Northern Rock Episode

David Mayes and Geoffrey Wood

Chapter 4 in Financial Institutions and Markets, 2009, pp 75-99 from Palgrave Macmillan

Abstract: Abstract We consider the lessons that might be learned by other countries from the problems with Northern Rock and the reactions of the UK authorities. We ask whether the surprise of the run on the bank came because economic analysis did not provide the right guidance, or whether it was simply a problem of practical implementation. We conclude it was the latter and that as a result other countries will want to review the detail of their deposit insurance and their regimes for handling banking problems and insolvency. The relationships between the various authorities involved were shown to be crucial; were a similar problem to occur in a cross-border institution, the difficulties experienced in the UK could be small by comparison.

Keywords: Northern Rock; bank failure; bank run; deposit insurance; lender of last resort (search for similar items in EconPapers)
Date: 2009
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DOI: 10.1057/9780230103245_4

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