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Factors leading to the collapse of Northern Rock and their current position.
Finance & Accounting
Pages 11 (2761 words)
Northern Rock was the eighth largest bank of United Kingdom (UK). At the beginning of the year 2007 it was riding high and in June 2007, the share prices of the bank were seen to touch high records…
After that it started to adapt aggressive steps in order to move high. The slowdown in the housing price inflation and an increase in the interest rate, Northern Rock issued warning regarding the profit of the bank. Soon the liquidity of the bank started to dry up and eventually pushed it towards collapse. The study tries to find out the factors that are responsible for the collapse of such a huge bank that was showing good business. At the same time it also focuses on the present condition of the bank. Table of Contents Abstract 2 Table of Contents 3 Chapter 1: Introduction 4 Chapter 2: Collapse of Northern Rock 5 Before Collapse 5 Reasons behind its collapse 7 Current Position 11 Chapter 3: Conclusion 12 REFERENCES 14 Chapter 1: Introduction The subprime mortgage financial crisis caused a steep rise in the subprime mortgage market of United States that started in the fall of year 2006 and became the cause of global financial crisis on July 2007. The newly-popular adjustable rate mortgages suffered an increase in the monthly payment due to the rising interest rates. Moreover the demise of the housing bubble caused the value of the property to suffer major decline leaving the house owners unable to meet their financial commitment and the leaders without any means of their losses. This financial crisis resulted into severe credit crunch, intimidating the solvency of many marginal banks and other financial institutions (Jansen, Beulig and Linsmann, 2010). Northern Rock was one of such banks that were severely hit by the waves of financial crisis.
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