Northern Rock, September 2007: Queues at the Counter, Strain on the Website
Northern Rock, 13 to 18 September 2007: queues at a thin branch network while most withdrawals went online, by phone and by post.
01
The Hour
20:30
Thursday 13 September 2007. London.
At 8.30 pm the BBC reported that Northern Rock had sought emergency support from the Bank of England. The authorities had planned to announce it on Monday 17 September.
Rumours had been circulating that afternoon. At 4.00 pm the Tripartite committee of the Treasury, the Bank and the FSA, meeting at deputy level, brought the statement forward to 7.00 am on Friday.
Northern Rock had meant to use the weekend to widen the bandwidth of its website. On the Treasury Committee's account, the run began that evening.
02
The Sequence
Reconstructed to the day. Hours appear only where the record gives them.
14 Sep
07:00. A Tripartite statement: the Chancellor had authorised the Bank of England to provide Northern Rock with a liquidity support facility, against appropriate collateral and at an interest rate premium. The terms had been settled in the early hours.
14 Sep
By lunchtime AFP reported customers queuing outside branches from London to Edinburgh to withdraw savings. In Dublin, RTE reported, some waited up to two hours at the lender's office.
14 Sep
The shares closed 31.46 percent lower on the London market, at 438 pence, according to AFP.
15 Sep
Saturday. Al Jazeera, citing news agencies, reported that thousands had jammed the lender's phone lines and website trying to withdraw money. Crowds lined up for a second day; RTE reported police called to control them and opening hours extended to 2pm.
16 Sep
Sunday. The Chancellor became convinced, the Treasury Committee later found, that a government pledge on deposits was the way to halt the run.
17 Sep
Monday. Lines began forming in the early hours, some customers arriving at 3am, RTE reported, with up to 300 people at the Dublin branch. Many online customers could not reach their funds because the site was overloaded.
17 Sep
The shares fell 40 percent at one point and closed 35.4 percent lower. AP put withdrawals since early Friday at 2 billion pounds.
17 Sep
After 5.00 pm. At a press conference, the Chancellor said the authorities would stand behind all existing deposits in Northern Rock during the current instability. The committee found that the announcement halted the run.
18 Sep
Tuesday. About 50 people waited outside the Kingston upon Thames branch before its 8am opening, Al Jazeera reported. Northern Rock said lines had formed at four branches by mid-morning, call volume was under 10 percent of Monday's, and most internet customers were logging on at the first attempt.
03
The Hidden Dependency
Most of the money left Northern Rock by internet, telephone and post, according to the Treasury Committee. The pictures came from the branches.
There were 72 of them, four in London. Many had only a couple of counters, because the lender did little of its retail business over the counter, and a large withdrawal could take up to 15 minutes under money laundering requirements.
On the committee's account, relatively few customers at each branch were enough to put a queue out of the door and into the street. Those queues, it found, were the most damaging images of the run.
The length of the line was set partly by the counter: a couple of positions and a check of up to fifteen minutes reached the pavement with relatively few people waiting.
04
What Still Worked
Internet withdrawals
Slow and overloaded through the weekend. The FSA chairman told MPs access was inadequate, but that everyone who tried to withdraw online succeeded.
Telephone and post
Carried most of the withdrawals, alongside the internet, according to the Treasury Committee.
Branch counters
Stayed open through the run, with Saturday hours extended to 2pm, and kept paying out at a couple of positions per branch.
The Bank facility
Available from Friday morning against collateral at a premium rate. The committee found it was needed almost immediately.
05
On the Record
The Plumbing
September 2007
Deposit protection at the time ran through the Financial Services Compensation Scheme. Channel 4 News set out its limits on 18 September: all of the first 2,000 pounds and 90 percent of the next 33,000, capping cover on 35,000 pounds at 31,700.
The Treasury Committee's report, The run on the Rock (January 2008), found depositors became aware that sums above 2,000 pounds were not covered in full, and that a failed lender's depositors could wait months, maybe even years, for insured deposits.
In October 2007 the limit became full cover of the first 35,000 pounds per person per firm.
06
The Pattern Library
#1
Cash machines continued to dispense through the bank closure under daily withdrawal limits that were imposed or lowered during the closure, and keeping the machines stocked with notes became a constraint.
Observed: Cyprus 2013, Greece 2015.
#2
Suppliers stopped extending their usual payment terms and asked to be paid before shipping or on delivery.
Observed: Iceland 2008.
#3
Queues formed at branches within hours of the official statement that set off the episode.
Observed: Northern Rock 2007.
CHANGED TODAY: No existing entry gained Northern Rock 2007. New entry #3 added.
