Loss management

At the end of the summer 2007, TV viewers saw lines of customers external branches of Northern Rock plc, as news broke that the edge was in crisis, panic set in as plurality thought they would lose their savings. This was the first ?run? on a British bank in over a coke years.

The aim of this report is to look at why it happened and to hitch if it could have been avoided. What BC Management was in place and who or what was to shoulder responsibility for this catastrophe?MAIN BODYBACKGROUNDNorthern Rock (NR) is a relatively young confederation which was founded in 1965 through the nu outdoors fusion reaction of two building societies, both of which were well naturalised themselves, however. The company grew by buying smaller mutual societies, the last in 1994. Later the company floated on the stock market to trounce more capital. Because the company was founded as a mutual golf club and its existence was to benefit the community, the Northern Rock foundation was established to ease concerns that the company was distancing itself (through floatation) from the community it was set up to dish out originally. Northern Rock became aggressive in their growth and up to their collapse were the 5th largest UK mortgage lender.

?The brave new knowledge base that enabled banks like Northern Rock to grow so strong is founded on ?Securitisation??the process that transforms mortgages, credit-card receivables and other financial assets into marketable securities?and the excogitation it spawned in ?structured? products. This was a revolution that brought huge gains. only when across the financial world investors and regulators are asking themselves whether it besides brought costs that are only now becoming clear?. (Economist, Sept2007).

But the foundation of their business model was not solid, hence it was risky as they only borrowed money from other banks, they had...

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