Is Northern Rock The Luckiest Bank Ever?

1 Response

I was just going through the newspaper(Mumbai Mirror) yesterday, when I came across this article in the editorial section. The heading was 'A bank is nationalised'. The first para highlighted the plight of the depositors when a bank drowns. At the first place, I thought it would be a story about an Indian bank. But later I realised it was a rock solid bank from UK........

My speculations were false indeed. It was the Northern Rock Bank from the Uk, with assets of over Rs.904000,00,00,000 , or 113 billion pounds. But suddenly, the Northern Rock plunged southwards, thanks to the new mortgage crisis. The scandal was discovered long back, in 2007. The bank still struggles due to high borrowing costs. But what exactly happened? People rushed to the bank to withdraw all their money amidst speculations that the bank may collapse. The result? The bank ran out of cash, and asked England's Reserve Bank for help. And what's the best part? The government nationalised the bank! Now, the bank's website says that the depositors' money is safe and all branches, call centres and other operations remain open for business as usual.

So why is the bank lucky? Or the luckiest? Usually, when such an event takes place, big banks jump to takeover such banks and all the shares are transferred. And the biggest advantage for these big banks is manpower. But take the case of Northern Rock. The Bank of England nationalised it straight away, just because it was one of the top five lenders of Mortgages UK. By doing this, the bank has not only restored its services, but also recieved the extra cash which it required.

So what do you have to say on this?

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1 Response:

Mortgage Advisor on January 8, 2010 at 5:46 AM

Northern Rock got lucky shame about the tax payers