The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Run on Northern Rock

  • C. A. E. Goodhart
Reference work entry


On September 14, 2007, Northern Rock, a medium-sized bank specialising in residential mortgages, suffered the first substantial run of retail depositors in the UK since the 19th century. It had previously adopted a policy of fast growth, largely financing itself by borrowing in wholesale markets and by securitisation. When the financial crisis struck in August, the wholesale funding markets closed to it and it could not get a further securitisation financed; so it became massively illiquid. The Financial Services Authority (FSA) had been focussing primarily on NR’s compliance with the Basel II capital adequacy requirement, and had been remiss in assessing the risks inherent in its overall business plan. After an unsuccessful review of alternative rescue policies, the authorities felt that a massive emergency loan from the Bank of England was the least bad alternative; closure would have probably led to contagion to other, similarly placed, banks. Unfortunately the news of the emergency lending leaked prematurely, and its interpretation in the media helped to trigger the run. The run was not stopped until the following Monday when the Chancellor of the Exchequer stepped in to guarantee all NR deposits, and then to provide 100% deposit insurance to all other banks as well.


Bank run Emergency lending Financial supervision Deposit insurance Wholesale funding Securitisation 

JEL Classifications

E58 G21 G33 
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  1. For a more general study of the circumstances and implications of the event, see Bruni, F. and Llewellyn, D. (eds.) 2009. The Failure of Northern Rock: A Multi-dimensional Case Study. SUERF – The European Money and Finance Forum, Vienna.Google Scholar
  2. For further details of events since the run, this article has relied on Wikipedia, notably Nationalisation of Northern Rock 2020 (, as modified on 2 January 2011, and other Press sources, notably Timeline: the Northern Rock Crisis by the Guardian (
  3. The FSA Internal Audit Division then examined The Supervision of Northern Rock: A Lessons Learned Review in their Report of March 2008.Google Scholar
  4. The most comprehensive academic account of the event is Milne, A. and Wood, G. 2009. Shattered on the Rock? British financial stability from 1866 to 2007. Journal of Financial Regulation, 10(2), 89–127. Geoffrey Wood both gave evidence to, and was the adviser of, the Treasury Committee for this Report.Google Scholar
  5. There are three main public sector reports. The best is that by The Treasury Committee of the House of Commons: The Run on the Rock, Fifth Report of Session 2007–8, Vol. 1, HC56–1 (26 January 2008).Google Scholar
  6. These reports only covered events leading up to and surrounding the run itself. For an account of the aftermath, the National Audit Office (NAO) report on HM Treasury: The Nationalisation of Northern Rock, 20 March 2009 (, should be consulted.

Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • C. A. E. Goodhart

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