01 The Hour
20:30
Thursday 13 September 2007
The BBC reported that evening that Northern Rock had asked for and received emergency financial support from the Bank of England. The Treasury Committee later fixed the report at 8.30 pm.
Every branch was closed. The terms of the facility were not finalised until the early hours of Friday, and the statement announcing it did not go out until 7.00 am. Until the doors opened, a saver who wanted to act on what he had heard had the website and the telephone.
02 The Sequence
13 Sep 20:30. The report of emergency support is broadcast. The branch network is shut for the night.
14 Sep Early hours. The terms of the liquidity facility are finalised.
14 Sep 07:00. The tripartite statement is issued by HM Treasury, the Bank of England and the Financial Services Authority. The Chancellor has authorised the facility against appropriate collateral and at an interest rate premium. The FSA judges Northern Rock solvent, above its regulatory capital requirement, with a good quality loan book.
14 Sep Through the day. Long queues form outside some branches. Later the website collapses and the phone lines are reported jammed. That is the Treasury Committee's ordering, and contemporaneous interviews in the queues run the other way. The shares fall 31 per cent.
15 Sep Saturday. Queues form again at dawn. Accounts of the amount withdrawn over the Friday and Saturday differ: Reuters reported an estimate of about 1.5 billion pounds, with some reports as high as 2 billion, around 8 per cent of deposits.
16 Sep Sunday. A message from the chief executive goes up on the website: savings are safe, a customer wanting some or all of the money back is entitled to it, and the wait may be longer than usual. The government says the bank has not drawn on the facility.
17 Sep Monday. Thousands queue again. Depositors in the line at the Oxford Circus branch tell reporters they came in person after failing to reach their accounts by website and telephone. A letter passed along the queues says the share price does not affect savings. The shares close 35 per cent down.
17 Sep Monday evening. At a Downing Street press conference the Chancellor says the government will guarantee all existing deposits at Northern Rock.
18 Sep Tuesday. The bank says queues are considerably down and that most calls that day are from customers reinvesting. About 50 people wait outside the Kingston upon Thames branch before it opens at 8am.
1 Oct The FSA moves deposit compensation to 100 per cent of the first 35,000 pounds, ending the structure that had covered the first 2,000 pounds in full and 90 per cent of the next 33,000.
03 The Hidden Dependency
Northern Rock's retail money did not sit mainly behind its counters. Postal accounts alone held about 10 billion pounds of the 24 billion pounds of retail deposits, and the bank had 1.4 million savings customers against a branch estate reported at 76.
Both remote routes gave way on the Friday, the site going down and the lines jamming. Depositors quoted in the Monday queues said they had come in person after failing to reach their accounts by either.
That left the branch network taking the traffic, and the queue outside it became the visible form of the withdrawal.
The channel with a fixed number of doors was the one still standing when the others jammed.
04 What Still Worked
The Branch Counters
The doors opened and the counters paid. The Sunday message from the chief executive said a saver wanting some or all of his money back was entitled to it, with a wait possibly longer than usual.
The Liquidity Facility
Authorised on the Friday against appropriate collateral at a premium rate. The government said on the Sunday that the bank had not yet drawn on it.
The Share Market
Trading continued and put a price on the bank each day: down 31 per cent on the Friday, closing 35 per cent lower on the Monday.
05 The Document
The Document 14 Sep 2007
Two pages from the Bank of England press office at Threadneedle Street, headed Liquidity Support Facility for Northern Rock plc, issued as a tripartite statement by HM Treasury, the Bank and the Financial Services Authority. It records that the Chancellor had authorised the facility against appropriate collateral and at an interest rate premium, on the recommendations of the Governor and the FSA chairman, under the Memorandum of Understanding of 22 March 2006. The FSA is recorded as judging the bank solvent, above its regulatory capital requirement, with a good quality loan book.
06 The Pattern Library
1
Remote access channels failed under load while the branch counter continued to pay out, so withdrawal demand arrived at a fixed number of physical service points.
Observed: Northern Rock 2007.
Changed today: New library opened. Entry 1 added from Northern Rock 2007, covering the failure of the website and telephone channels while the branch counters continued to pay out.