Northern Rock failed because it funded most of its mortgage lending from wholesale markets rather than savers. When credit markets froze in August 2007 it need…
Northern Rock formed from two Victorian building societies, founded in 1850 and 1865, owned by savers.
Northern Rock demutualised and listed on the stock market, free to grow fast with borrowed money.
Retail deposits fell from 62.7% of liabilities in 1997 to 22.4%. Markets and mortgage bonds paid for the rest.
US subprime fears froze interbank lending and mortgage-bond markets. Northern Rock could not refinance.
The BBC reported the request on 13 Sep; the Bank of England announced emergency support at 7am on 14 Sep.
About £1bn on day one. The NAO put the total at just over £4.6bn over a few days.
Chancellor Alistair Darling guaranteed all existing Northern Rock deposits. The queues faded.
Bids from Virgin and Olivant were judged poor value. Emergency law took the bank into public hands.
Split in 2010, the branch bank sold for £747m up front. The mortgages were sold off by 2021.
The FSCS limit rose to £120,000, with no co-insurance and payouts in days.
Ex-Northern Rock borrowers lost Breeze v TSB on 30 Jan; Virgin Money moved into Nationwide on 2 Apr.
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