------------------------------------------------- The Case of Northern Rock -------------------------------------------------
Table of Contents 1 Scope of Study 3 2 Introduction to the Northern Rock Debacle 3 2.1 Introduction to Northern Rock’s Business Model 4 3 Internal Analysis 7 3.1 Analysis of Northern Rock’s Balance Sheet 2006 7 3.1.1 Northern Rock’s Sources of Funding 7 3.1.2 Asset and Liability Maturity Mismatch 2006 8 3.1.3 Peer Group Ratio Comparison to Assess Northern Rock Liquidity Risk 2006 9 3.2 Exposure to Low Probability High Impact (LPHI) Risk 10 4 Analysis of Market Condition 10 4.1 U.S Sub-prime Mortgage Market Crisis 10 4.2 Consequences of U.S. Sub-prime Mortgage Market Crisis 11 4.3 Also, stripped off its heavy regulations as a building society, Northern Rock was able to expand its source of funding, instead of relying customers’ deposits and is not limited to serve residents only from their community – thus increasing Northern Rock’s scale of business. This allowed Northern Rock to have a comparative advantage over its competitors as it consistently provided the best mortgage rates in Britain due to its sheer size. | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | Securitised Finance ($bn) | 0.6 | 2.3 | 4.7 | 9.3 | 14.8 | 22.1 | 31.2 | 40.2 | % of Customer's loans | 3 | 11 | 18 | 27 | 34 | 40 | 44 | 46 | YOY increase ($bn) | 0.6 | 1.7 | 2.4 | 4.5 | 5.6 | 7.3 | 9.1 | 9.1 | Table 1 Year-on-Year Increase of Proportion of Customer Loans of Securitised Finance
What Northern Rock did was to securitize and package its existing mortgages into mortgage-backed securities (MBS), and sell them to their specially created Special Purpose Entity (SPV) – Granite. Granite in turns breaks these illiquid long term mortgages into smaller and shorter term securities called asset-backed commercial paper (ABCP) and sells them to investors. This process created extra funds for Northern Rock’s mortgage business and increase Northern Rock’s assets considerably.
Corporate and Wholesale Finance - 12BSP053 “Since 2007 to mid 2009, global financial markets and systems have been in the grip of the worst financial crisis since the depression era of the late 1920s. Major Banks in the U.S., the U.K. and Europe have collapsed and been bailed out by state aid”. (Valdez and Molyneux, 2010) Identify the main macroeconomic and microeconomic causes that resulted in the above-mentioned crisis and make an assessment of the success or otherwise of the actions taken by…
GOLDEN GATE BAPTIST THEOLOGICAL SEMINARY NORTHERN CALIFORNIA E- CAMPUS PAPER TWO EXODUS 17: 8-17 PRESENTED TO: DR. MICHAEL SNEARLEY IN PARTIAL FULLFILLMENT OF THE REQUIREMENTS FOR OLD TESTAMENT INTRODUCTION, S1112-91 BY WILLIAM DEW 383909 OCTOBER, 18TH 2014 My passage for this paper is Exodus 17: 8-17 Historical Context It is believed that Moses lived from around 1525 to 1405B.C. and wrote at least several passages of the book of Exodus with Chapter 17 being one of them. The narrative…
a sculptor, photographer and environmentalist, creating different ranges of sculpture and land art which are placed in natural and urban settings. He creates exquisite temporary sculptures from a range of natural materials; snow, ice, leaves, bark, rock, clay, stones, feathers petals and twigs. He creates outdoor sculpture in the area where he finds his material, which displays an understanding connection with the natural world. As and completes his work photographs his artworks once in the angle…
buoyed by the expectation that house prices would continue rising indefinitely. Many specialized in lending to so-called ‘ninja’ borrowers – no income, no job and no assets – in the so-called sub-prime market. In the UK the ex-building society Northern Rock followed a similar policy, lending on mortgages of 125 per cent of the value of the property, financed by its own borrowing from the wholesale money market. The money markets themselves became contaminated. In order to spread their risk, the US…
has been filled in. Answer all of the questions in Part I in the same way. Mark only one answer for each question. If you want to change an answer, be sure to erase your first mark completely. Then mark the answer you want. You will not need scrap paper. You may use the pages of this test booklet to work out your answers to the questions. You may use a calculator if needed. When you are told to start working, turn the page and begin with question 1. Work carefully and answer all of the questions in…
psychological differences been thrust together to work as a team and forced to get along with each other. This paper will attempt to explain these differences and how to possibly overcome these differences. Summaries and Critiques 1st Article: Young workers’ work values, attitudes, and behaviors. According to Loughlin and Barling (2001), young workers are the workforce of the future. This paper focuses on 2 major influences on their work values, attitudes, and behaviors; the influences of their families…
signature for more than a billion years”7. In the next section, I am going to attempt to condense over a billion years worth of Geologic History into less than ten pages. Despite complex knowledge and strange words it is a simple story of time and rocks, moving and changing: the formation of the Hudson River and its valley. The Hudson’s geological “personality” very much reflects its structure and the changes made on it, underneath it and all around it from the Pleistocene glaciations8 . The bedrock…
candidacy didn’t kill Truman’s chances then the Dixiecrats certainly would. Truman refused to give up and resorted to red- baiting, denouncing “Henry Wallace and his communist” whenever he could. He also sought support from African American voters in the northern cities, becoming the first presidential candidate to campaign in Harlem. In the end, he prevailed and the African American electoral votes were key in his success. In Truman’s Fair Deal he pushed forward legislation to support the civil rights for…
GEA 2000 Fall 2013 Exam # 1 Review Questions* Introduction chapter and Globalization (PPT) 1. Alfred Wegener's supercontinent is known as: Pangaea 2. The process by which a tectonic plate consisting of less heavy rock rides up over a heavier plate is known as: Subduction 3. The current interglacial period is known as the: Holocene 4. Which water body is surrounded by a geologically-active Ring of Fire: The Pacific Ocean 5. Which of the following locations is not…
published a paper in 1946 in which he proposed that the carbon in living matter might include carbon-14 as well as non-radioactive carbon.[8][9] Libby and several collaborators proceeded to experiment with methane collected from sewage works in Baltimore, and after isotopically enriching their samples they were able to demonstrate that they contained radioactive carbon-14. By contrast, methane created from petroleum had no radiocarbon activity. The results were summarized in a paper in Science in…
