208-2011-L17

208-2011-L17 - Econ208 MarekKapicka Lecture17...

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Econ 208 Marek Kapicka Lecture 17 Bank Runs: Northern  Rock
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3. The case of Northern Rock n Failed in September 2007 n First UK bank failure since 1866 n The main point:  n Small depositors’ panic was the most visible n However, institutional investors’ withdrawals were  in fact much more important n The observed small depositors’ panic was just a  consequence
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3. The case of Northern Rock
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3. The case of Northern Rock A little bit of history: n Northern rock traces back to 19th  century n Regional bank until mid 1990’s n Rapid expansion between 1998-2007 n In 1997, 5th largest UK bank in  mortgage related asset holdings n Retail deposits were relatively  insignificant
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3. The case of Northern Rock
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3. The case of Northern Rock The panic n Timing: n August 9, 2007: Market for short-term borrowing froze n Following problems in BNP Paribas n August 14: Bank of England (B of E) informed about the  problems n August 14-September 14: B of E tries to solve the problem  “behind the scenes” n September 13: BBC announces that NR has sought B of E 
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This note was uploaded on 12/26/2011 for the course ECON 208 taught by Professor Staff during the Fall '08 term at UCSB.

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208-2011-L17 - Econ208 MarekKapicka Lecture17...

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