Case of Northern Rock

Abstract

The UK bank Northern Rock suffered a bank run in 2007. Withdrawal of retail deposits was covered extensively in the media, but Northern Rock’s failure was due to the silent run on wholesale funding in the summer of 2007 that preceded the retail depositor run. The securitisation vehicles of Northern Rock left it particularly vulnerable to the deleveraging by wholesale creditors in 2007, and poses many pertinent questions for the management of financial risks in an era when banking and capital markets are intertwined.