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The U.K. nationalized Northern Rock

The U.K. nationalized Northern Rock. Presented by: Mohammed ElSayed. Summary of the crisis.

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The U.K. nationalized Northern Rock

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  1. The U.K. nationalized Northern Rock Presented by: Mohammed ElSayed

  2. Summary of the crisis • Northern Rock was a British bank, most recently owned and operated by Virgin Money. During 2012 the Northern Rock brand was phased out and replaced by Virgin. Northern Rock was best known for becoming the first bank in 150 years to suffer a bank run after having had to approach the Bank of England for a loan facility, to replace money market funding, during the credit crisis in 2007. Having failed to find a commercial buyer for the business, it was taken into public ownership in 2008, and was then bought by Virgin Money in 2012.

  3. Pre-crisis

  4. "very positive" • July 25, 2007: Northern Rock issues upbeat trading statement. The outlook for business, it says, is "very positive".

  5. “The Day the World Changed" • August 9: European Central Bank injects a record Euros (£70.6bn) of liquidity into the European banking system, after French bank BNP Paribas suspends three investment funds worth Euros 2bn, citing problems in the US sub-prime mortgage sector. • Adam Applegarth, Northern Rock's chief executive at the time, called it "the day the world changed".

  6. Frayed Nerves • August 20: Northern Rock seeks to calm investors' frayed nerves by clarifying its exposure to collateralized debt obligations and mortgage-backed securities, the two asset classes that have been at the heart of the sub-prime crisis.

  7. Libor • September 4: Libor - the rate at which banks lend to each other - soars to its highest level in almost nine years.

  8. BBC • September 13: BBC reports that Northern Rock has sought emergency funding from the Bank of England.

  9. Crisis

  10. "business as usual" • September 14: Northern Rock releases a statement confirming that it has approached the Bank of England for assistance. Applegarth claims it is "business as usual" for the company. His comments fail to reassure rattled investors: the shares plunge by 32 per cent. As investors sell, customers panic and queues begin to form outside Northern Rock branches across the country. Queries from worried customers cause its website to crash.

  11. Guarantee all Deposits • September 17: With the queues at Northern Rock branches showing no sign of easing, Alistair Darling, the Chancellor, attempts to reassure customers and halt the outflow of money by agreeing to guarantee all deposits held at Northern Rock.

  12. Promises to inject £10bn • September 19: Bank of England promises to inject £10bn into three-month money markets to reduce the amount Northern Rock needs to pay to fund its mortgage business.

  13. King is grilled • September 20: King is grilled by the Treasury Select Committee over his handling of the crisis. He says he would like to have secured financial support for Northern Rock in secret but was prevented from doing so by regulations

  14. Sell parts of the business • September 25: Northern Rock tells investors that it is cancelling its dividend and reveals that it is in talks to sell parts of the business.

  15. Applegarth resigns • November 16: Applegarth resigns. He had been with the bank since leaving university.

  16. Emergency Meeting • December 21: The board of Northern Rock capitulates to shareholder pressure and agrees to hold an emergency meeting on January 15.

  17. The Bank have to be Nationalized. • January 13, 2008: It emerges that the Treasury has lined up City heavyweight Ron Sandler as a provisional chairman should the bank have to be nationalized.

  18. curb some of the board' powers • January 15: Shareholders back proposals to curb some of the board' powers.

  19. Shares Slump • January 16: Northern Rock shares slump by more than 20 per cent as investors bet that the bank will eventually be nationalized.

  20. New Bidders • January 21: The Treasury invites new bidders to come forward for the Rock.

  21. Better Deals as the Race • February 16:Virgin and rival in-house management team both submit better deals as the race for the lender nears the finishing post.

  22. Nationalization •  February 22 – The U.K. nationalized Northern Rock, the U.K.’s fifth-largest mortgage lender, after two unsuccessful bids by private banks.

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