Campbell, Andrew --- "Northern Rock, the Financial Crisis and the Special Resolution Regime" [2011] ELECD 612; in Gray, Joanna; Akseli, Orkun (eds), "Financial Regulation in Crisis?" (Edward Elgar Publishing, 2011)

Book Title: Financial Regulation in Crisis?

Editor(s): Gray, Joanna; Akseli, Orkun

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781848445543

Section: Chapter 3

Section Title: Northern Rock, the Financial Crisis and the Special Resolution Regime

Author(s): Campbell, Andrew

Number of pages: 17

Extract:

3. Northern Rock, the financial
crisis and the Special Resolution
Regime
Andrew Campbell

INTRODUCTION

This chapter considers the unexpected effect that the demise of
Northern Rock has had on bank insolvency law in the United
Kingdom.1 It considers the background to the new framework for
dealing with insolvent banks, which was introduced by the Banking
Act 2009, and it then goes on to examine certain aspects of the
Special Resolution Regime (SRR) which the legislation introduced.2


THE RUN ON NORTHERN ROCK3

The UK had not experienced a significant banking crisis since the
collapse of Barings Bank in 1995 and the possibility of a significant
British bank being in financial difficulties was something that was
not within the contemplation of most bank customers. However,
in the late British summer of 2007 this situation was to radically
and quickly change. During July and August of 2007 liquidity had
started to dry up on the international money markets and this had a
direct effect on the financial position of Northern Rock, which had
become so dependent on getting its funds from these markets. By the
middle of August it had become obvious to the senior management
of Northern Rock that it was having serious difficulties in trying to
refinance some extremely large commitments that had become due.
By early September it was in a very precarious position. It had tried
to access lender of last resort assistance from the Bank of England
but that had been refused.4

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