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Lessons from the Northern Rock Episode

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  • David G. Mayes
  • Geoffrey Wood

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 diffi culties experienced in the UK could be small by comparison.

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Bibliographic Info

Article provided by CEPII research center in its journal Economie Internationale.

Volume (Year): (2008)
Issue (Month): 114 ()
Pages: 5-27

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Handle: RePEc:cii:cepiei:2008-2ta

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Related research

Keywords: Northern rock; bank failure; bank run; deposit insurance; lender of last resort;

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Cited by:
  1. Hyun Song Shin, 2009. "Reflections on Northern Rock: The Bank Run That Heralded the Global Financial Crisis," Journal of Economic Perspectives, American Economic Association, vol. 23(1), pages 101-19, Winter.
  2. David G. Mayes, 2009. "Banking Crisis Resolution Policy - Lessons from Recent Experience - which elements are needed for robust and efficient crisis resolution?," CESifo Working Paper Series 2823, CESifo Group Munich.
  3. Ojo, Marianne, 2009. "Reviewing regulatory objectives: should the scope of regulation be extended?," MPRA Paper 15547, University Library of Munich, Germany.
  4. David G. Mayes, 2008. "Avoiding the Next Crisis," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 9(4), pages 44-50, December.

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