Britain's eight-largest bank, Northern Rock, was set upon by customers, as news the company had been forced to seek the help of the Bank of England to infuse it with more cash initiated the run.
To make matters worse, the computer system of the bank collapsed from the surge of online customers attempting to transfer their money out of the bank. Accusations were even flying that the bank purposely shut down the system to keep customers from transferring their money. A spokesman for the bank said those charges were "ridiculous."
Alistair Darling, the Chancellor, who authorized the rescue, said: “At the moment there is plenty of money in the system, the banks have got money ... they are simply not lending in the short-term way that institutions like Northern Rock need.”
That didn't seem to convince a lot of people, as one man and his wife literally blocked a Cheltenham branch manager in her office when she told them they couldn't withdraw £1 million savings without giving advance notice. The police had to come and calm the people down.
Northern Rock was especially vulnerable to the credit crunch, as it is highly exposed to wholesale investors, who are pretty much out of the game at this time. The bank is also been overly aggressive in lending, as they increased new loans by 43 percent over the first 8 months of 2007.
The bank has about 85 percent of its business come from mortgage bankers, equaling about £24.7 billion.
Chief Executive Adam Applegarth says he has extra cash on the way to meed the demand for withdrawals.
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» Run on Northern Rock Bank in Britain Continues from ManagersRealm
Yesterday we talked about the run on Northern Rock bank in England, as customers flocked to the physical banks as well as online to draw out their money. The online traffic was so heavy the computer system crashed, prompting customers... [Read More]
Tracked on: September 15, 2007 6:56 PM | Permalink to Trackback