Banks collapsing. How long do you have between warning signs and it happening?

muggz · 8 July 2008 at 4:00PM

When Northern Rock fell apart does anyone remember how much time there was between warning signs and it actually happening?

I cant quite remember what happened with Northern Rock, just people outside the banks trying to get there money out but I cant remember the chain of events that sparked this off.

Thanks all

F_T_Buyer · 8 July 2008 at 6:34PM

It started when Robert Peston of the BBC revealed it on either the website and/or 10pm news (I think). This started it all off, with queues first thing the next day.

When the news broke that people were queuing, the whole run really got going.

OR: You could just read financial forums, Northern Rock was talked about at huge length on House Price Crash. When they started the fixed saver (around 6.7% ish), which was way above everyone elses at the time, the warning signs were clear.

The next to go is Bradford & Bingley. There shares are down another 20% today (down 92% from the peak in the last 12mths) as reality is dawning on investors.

Although don't worry, you won't hear if another bank is bailed out due to new legislation by the government putting a news black out on such support. Well, I say don't worry, unless you're a tax payer! _pale_

Neillgb · 8 July 2008 at 6:43PM

Yea. God knows how much this is going to cost the tax payer. The banks will milk UK plc for as much as they can get and it will all be hush hush. Details will probably come out years from now.

Banks milking tactic will be something along the lines of , "...well as you (UK plc) have already put so much money into this/that bank it would be a shame to see it collapse for the sake of a little extra, all the money already spent will be wasted..."

50p says Alliance and leicester are next.

[Deleted User] · 8 July 2008 at 6:45PM

If B&B went the way of the pear what would happen to a £3600 cash ISA? How quickly do people think the FSA would pay out and I'd get my money? What about the interest earned so far this year? What about the lose in interest between getting my money and them going under?

dunstonh · 8 July 2008 at 6:47PM

I cant quite remember what happened with Northern Rock, just people outside the banks trying to get there money out but I cant remember the chain of events that sparked this off.

Best way to tell which bank is going under is to watch Sky News. Their scaremongering is almost certain to increase the queues out the door and turn the false headlines into a self fulfilling prophecy.

What pretty much sparked the final damage was the media. Failing business model needing people to keep their deposits and make more so what do we do? lets encourage everyone to take their money out. Indeed, lets ask the experts for their opinions. cue the 50 year old Daily Mail reader in the queue to say what he thinks...

F_T_Buyer · 8 July 2008 at 6:48PM

Oh, and you can search credit ratings of institutions too:

http://www2.standardandpoors.com/portal/site/sp/en/eu/page.ratingssearch/ratings_search/2,1,1,5,0,0,0,0,0,0,0,0,0,0,0,0.html

F_T_Buyer · 8 July 2008 at 6:54PM

dunstonh wrote: »

Failing business model needing people to keep their deposits and make more so what do we do? lets encourage everyone to take their money out.

I see your point, however the media was reporting official figures encouraging people not to withdraw funds. It was not irrational for people to withdraw funds at all, as Meryv King has clearly explained.

The problem with using official figures is no one believes the government on issues like this, but only the government can be to blame for the reputation it has due to it's competence on many past issues.

I would much prefer a free media, reporting the news and not be told just what corporations and government want us to hear. Although calling our media 'free' is going a little too far, but it's free in comparison to many other countries!

Edit to add: Northern Rock would have failed anyway if no depositors took money out. The main problem was refinancing expired loans, which they could not do at favourable rates.

LucyTheDwarf · 8 July 2008 at 6:57PM

dunstonh wrote: »

Best way to tell which bank is going under is to watch Sky News. Their scaremongering is almost certain to increase the queues out the door and turn the false headlines into a self fulfilling prophecy.

Doesn't the media just do your head in?!

You don't want to know how many people I tried to explain that point to in the past... the media should know when they are reporting news, and when they are causing (well, exacerbating, at least) trouble. And they should stick to reporting the news!

freddysmith · 8 July 2008 at 7:08PM

I will get worried if they shut down or restrict access to their online website for money transactions (mainly withdrawls). Although if that happens its to late anyway and will have to wait until the Government bails them out. I do feel confident that I would still get all my money back with interest.

napoleon · 8 July 2008 at 7:26PM

Me too. The government will save the day if needed a bit like Superman. Yippee!

dunstonh · 8 July 2008 at 8:43PM

Edit to add: Northern Rock would have failed anyway if no depositors took money out. The main problem was refinancing expired loans, which they could not do at favourable rates.

It is almost certain that the NR business model would have failed sooner or later. The media coverage ensured sooner. However, a few more weeks of behind the scenes negotiations and maybe a takeover may have been possible. Remember it wasnt that long since LTSB were turned away from buying Northern Rock.

It wasnt so much the fact the media caused it as they certainly didnt. However, the way the reported it just made it worse. If I was in banking and found my bank was suddenly being touted by the press as having troubles then I would be concerned even if the balance sheets dont indicate any trouble.

Once the credit crunch eases and the money begins to flow again I reckon you are going to see a load of mergers and acquisitions going on. They wont get blocked by the Govt this time round.

Banks collapsing. How long do you have between warning signs and it happening?

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