The Northern Rock Crisis

The cry for help was drastic, and the reaction extraordinary. northern jounce, one of Britain?s biggest mortgage lenders and latest victim of the American credit crisis needful help from The Bank of England. The government ensured them a guaranty to gain their liquidity problems whereby the already confused customers became even more shitless to lose their money. Without avail, Bank Boss Adam Applegarth, called it ?Business as usual? while Chancellor Alistair Darling tried to relieve the enraged customers. (Northern Rock besieged by savers ? BBC)On the morning of Friday family line 14th the employees had to face big queues in front of their limb bank. (?Hit by a Rock? ? The Economist) The customers wanted to echo their money out of Northern Rock because although the bank trustworthy a government guaranty the trust was gone. Furthermore that was non the only consequence the Northern Rock crisis caused that day. The Northern Rock shares lost about ?29% of their value? (?Hit by a Rock? ? The Economist) accordingly this burdened the European derivation securities industry.

The Northern Rock crisis shows how fragile the relationship is between customers and banks. thereby Northern Rock became surely the victim of unfavourable and sometimes disproportionate market reactions as well as deficient safety mechanisms.

Because of the comparatively low size of customer deposits, Northern Rock depends on funds that the banks loan among themselves on the monetary market. ?They refinance about 72% of their credits with capital market activities?. (Northern Rock ? Täter und Opfer - Handelsblatt) That is a very modern panache of doing business and sometimes is eyed mistrustfully by early(a) Banks. For that reason, many experts watched the crisis on the one hand with certain worries unless on the other hand with satisfaction.

They even assumed the commercial bank and its aggressive marketing policy the...

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