Reflections on Northern Rock

The Bank Run that Heralded the Global Financial Crisis

Datos Bibliográficos

ID4029657
AutoresHyun Song Shin (0000-0002-0821-2759, Princeton University, Princeton, New Jersey., autor de correspondencia)
Año2009
Volumen23
Número1
Páginas101-119
Fecha de publicación2009-01-01
Peer ReviewedSí
Open AccessSí
TipoARTICLE
RevistaThe Journal of Economic Perspectives (JOURNAL)
Identificadores de la revistaISSN: 0895-3309 • E-ISSN: 1944-7965
EditorialAmerican Economic Association (PUBLISHER • US)
DOI10.1257/jep.23.1.101
OpenAlexW2071059350
IdiomaEN
Citas recibidas24
Referencias citadas12

The U.K. bank Northern Rock became the first high-profile casualty of the global financial crisis of 2007-2008 when it suffered its depositor run in September 2007. In spite of the television images of long lines of depositors outside its branch offices, the run on Northern Rock was unlike the textbook retail depositor run caused by coordination failure. Also, contrary to received wisdom, its reliance on securitization was not an immediate factor in its failure. Rather, its problems stemmed from its high leverage coupled with reliance on institutional investors for short-term funding. When the de-leveraging in the credit markets began in August 2007, Northern Rock was uniquely vulnerable to the shrinking of lender balance sheets arising from the tick-up in measured risks. Financial regulation that relies on risk-weighted capital requirements is powerless against such runs. The Northern Rock case also offers lessons concerning the economics of short-term debt

Balance sheet · Bank run · Business · Debt · Economic policy · Economics · European union · Financial crisis · Financial system · Macroeconomics · Market liquidity · Resizing · Securitization · Banking stability, regulation, efficiency · Credit Risk and Financial Regulations · Global Financial Crisis and Policies · Finance