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Northern Rock: The anatomy of a crisis – the prudential lessons

Author

Listed:
  • Sonia Ondo-Ndong
  • Laurence Scialom

Abstract

This paper attempts to analyse the main characteristics of the Northern Rock crisis and the responses of the Bank of England as lender of last resort. On the basis of the diagnosis about the causes and the handling of this banking crisis we detect the shortcomings prevailing in the UK prudential device. We therefore try to draw the prudential lessons of this experience. As we cannot claim to present an exhaustive picture of the crisis’s implications from a prudential point of view, we chose to focus instead on the points with practical significance far beyond the UK’s case.

Suggested Citation

  • Sonia Ondo-Ndong & Laurence Scialom, 2008. "Northern Rock: The anatomy of a crisis – the prudential lessons," EconomiX Working Papers 2008-23, University of Paris Nanterre, EconomiX.
  • Handle: RePEc:drm:wpaper:2008-23
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    File URL: http://economix.fr/pdf/dt/2008/WP_EcoX_2008-23.pdf
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    References listed on IDEAS

    as
    1. Robert A. Eisenbeis & George G. Kaufman, 2007. "Cross-border banking: challenges for deposit insurance and financial stability in the European Union," FRB Atlanta Working Paper 2006-15, Federal Reserve Bank of Atlanta.
    2. Rochet, J C., 2008. "Liquidity regulation and the lender of last resort," Financial Stability Review, Banque de France, issue 11, pages 45-52, February.
    3. Philip Strahan, 2008. "Liquidity Production in 21st Century Banking," NBER Working Papers 13798, National Bureau of Economic Research, Inc.
    4. Larry Wall & Maria Nieto, 2006. "Precondition for a Successful Implementation of Supervisors' Primpt Corrective Action: Is There a Case for a Banking Standard in the EU?," FMG Special Papers sp165, Financial Markets Group.
    5. Goodhart, C., 2008. "Liquidity risk management," Financial Stability Review, Banque de France, issue 11, pages 39-44, February.
    6. Laurence Scialom, 2006. "Pour une approche holiste du filet de sécurité financière dans l'Union Européenne : quelques arguments," Revue d'économie politique, Dalloz, vol. 116(4), pages 471-486.
    7. Laurence Scialom & Michel Aglietta, 2003. "The Challenge of European Integration for Prudential Policy," FMG Special Papers sp152, Financial Markets Group.
    8. Mayes, David G., 2004. "Who pays for bank insolvency?," Journal of International Money and Finance, Elsevier, vol. 23(3), pages 515-551, April.
    9. Giovanni Dell'Ariccia & Deniz Igan & Luc Laeven, 2008. "The U.S. subprime mortgage crisis: a credit boon gone bad?," Proceedings 1104, Federal Reserve Bank of Chicago.
    10. Laurence Scialom, 2007. "Pour une politique d'actions correctives précoces dans l'Union européenne : les carences institutionnelles et légales," Revue d'Économie Financière, Programme National Persée, vol. 89(3), pages 111-121.
    11. Tirole, J., 2008. "Liquidity shortages: theoretical underpinnings," Financial Stability Review, Banque de France, issue 11, pages 53-63, February.
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    Cited by:

    1. Farhi, Maryse & Cintra, Marcos Antonio Macedo, 2009. "The Financial Crisis and the Global Shadow Banking System1," Revue de la Régulation - Capitalisme, institutions, pouvoirs, Association Recherche et Régulation, vol. 5.

    More about this item

    Keywords

    bank bankruptcy; deposit insurance; liquidity regulation;

    JEL classification:

    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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