Northern Rock borrowed short, lent long, and caused the first UK bank run in 150 years

Northern Rock was formed in 1965 from the merger of two North East England building societies and demutualised to become a bank in 1997, floating at £4.52 per share. Under chairman Matt Ridley and CEO Adam Applegarth, it pursued an aggressive growth model: borrow short-term from international wholesale money markets, lend long-term for mortgages, and securitise and sell those mortgages on global capital markets. By 2006 it generated £5 billion in revenue and £443 million in net income and had been promoted to the FTSE 100.

The model worked only as long as wholesale credit was available. When the US subprime mortgage crisis hit in August 2007, global demand for securitised mortgages collapsed. Northern Rock could neither raise new funding by selling its loan books nor repay the short-term money market loans it depended on. On September 14, 2007, it sought an emergency liquidity facility from the Bank of England — the first time the central bank had acted as lender of last resort in this way.

The news triggered the first British bank run in 150 years. Depositors queued outside branches across the UK, with the Golders Green queue becoming the defining image of the crisis. The government tried twice to find a private buyer, but neither Virgin Money nor Olivant Group could commit to repaying taxpayers within three years. On February 22, 2008, Northern Rock was nationalised — the government extended £26.9 billion in loans. In 2012 it was sold to Virgin Money for £747 million, and in 2024 its remnants became part of Nationwide Building Society.