On the rocks

13 September 2007: a date destined to live long in the annals of City history. Northern Rock’s approach to the Bank of England (BoE) as a lender of last resort proved a stark and shocking demonstration that the waves created by the US subprime mortgage crisis had well and truly crossed the Atlantic.

It triggered the first run on a major bank for well over 100 years, not only by nervous customers – who withdrew billions of pounds in savings, wiping £4bn from the bank’s share value in the process – but also by the world’s legal elite.

At press time, the flurry of activity surrounding the beleaguered bank had thrown up no fewer than 16 legal roles (see table, page 64). With new bidders entering the fray each week, that number only looks set to rise even further.

If you wind back the clock a mere 12 months, City analysts were lauding Northern Rock’s lending model for its simplicity and effectiveness. At its peak, the company was valued at over £6bn and was the country’s fifth-largest mortgage lender.

Its decline has been swift. Volatile trading on 20 November saw the bank’s shares suspended six times in an attempt to stabilise its pricing, which had plummeted 40% to a record low of 60p. At the time of writing, the bank is worth just £440m.

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