The Failure of Northern Rock in the Light of Banking Economics and Regulation

The Failure of Northern contention in the Light of Banking political economy and Regulation Introduction Increasing global connectivity and integration in todays world ensures that almost whatsoever serious problem has global ramifications. The global financial system give the gate serve as a key example of this phenomenon. Very recently, Britains fifth-largest owe lender Northern Rock was rescued by sine qua non funding from the Bank of England. This made the Newcastle-based firm the highest profile UK victim of the global credit crunch that had been triggered by the sub-prime mortgage crisis in the US. The bank run on Northern Rock that followed was remarkable in recent UK monetary history. The Overend Guerney crash of 1866 was the last put down bank run in the UK, before Northern Rock lost over £2 billion, starting on the fourteenth of September 2007. Background The run on Northern Rock can be considered as the most vivid indication of the transmittal that consumed the financial markets around the world. The company did no overseas lending. Nevertheless, the spill-over make of the failing US mortgage market sealed the hazard of the company when the money markets that Northern Rock had depended on for long time crashed at the start of August 2007.

The sub-prime mortgage market crisis started in the United States in the fall of 2006 and took hold as a global financial crisis by July 2007. Due to innovations in securitization, the risks from these sub-prime mortgages had to be shared more broadly with investors which essentially led to the thumb effects in the world-wide economy. The mortgages are generally repackaged into a transition of complex investment securities which are bought by institutions to diversify their portfolios. In the case of the US sub-prime mortgages, European banks bought the securities that were based on these mortgages, without any real understanding of the risks they were running. The crisis broke in August when French bank BNP Paribas suspended three of its... If you want to get a full essay, order it on our website: Ordercustompaper.com

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