Ten years ago this week Britain witnessed a run on Northern Rock, an event which sent ripples of panic through the whole financial and political systems. The prime minister, Gordon Brown, described it later as his worst moment in Downing Street, and he, along with many others, will never forget the image of pensioners and savers, armed with flasks of tea and deckchairs, queuing for days outside the bank’s branches.
Bank runs are scary things and if this one had not been contained, Mr Brown wrote, it could quickly have spread to the other banks, ATMs would soon run out of cash, credit cards wouldn’t work, and within days people would struggle to put food on the table. Riots and social unrest and breakdown would soon follow.
Northern Rock was Britain’s first bank run in over a century and, amazingly, the only bank run in any developed country during the financial crisis. Tim Geithner, chairman of the New York Fed at the time, feared it would spread to the US where there were banks which appeared a good deal more vulnerable than Northern Rock. But he took action to cut it off, the Bank of England didn’t and the rest is history.
_______________
Read more:
UK lenders plan to close record 762 branches as banks pivot towards digital space
RBS looks to Amsterdam as post-Brexit home
_______________
The extraordinary thing about this story is that it has a happy ending, or at least happy for some. It now emerges that the UK government, which provided emergency funding of £37 billion for Northern Rock and then nationalised the stricken bank, has effectively got all its money back and will actually make a profit.
No Northern Rock depositor lost money – the government’s last-minute rescue saw to that. But shareholders were wiped out, as they invariably are when a company goes bust. That’s the difference between risk capital and deposits. Now they feel it was they who got the raw end of the deal. The UK Treasury has sold off most of the Northern Rock assets, essentially mortgages on houses all over the country, and recouped most of its £37bn of funding it made available. It is now left with a debt of £4.6bn, owed to it by NRAM, the body it set up to manage the bank’s loans. The assets that remain are worth a good deal more than that.
Whoever would have forecast that when the run was at its height? Certainly not the seriously rattled denizen of Number 10 Downing Street or his equally panicky neighbour, the chancellor Alastair Darling. No one was thinking of making a profit then,
Shareholders of course haven’t a chance of getting their money back. If the government hadn’t intervened, Northern Rock would have been bust within hours and shareholders would have got nothing anyway. The last thing in the world Gordon Brown wanted, as he confessed himself, was to nationalise a bank – even Old Labour had never done that and Mr Brown was determined that his New Labour government would avoid it at any cost. When all his efforts to find a buyer for the carcase failed, he actually insisted on changing the word “nationalisation” in the press release to “taken into temporary state ownership”, and announced his intention of privatising Northern Rock again as soon as possible.
The bank was then broken into a "good" bank, which was sold to Virgin Money, and a "bad" bank, all the unrealisable assets and loans, which were left with the government. Losses on those assets, largely consisting of mortgages which Northern Rock offered at apparently reckless rates – up to 125 per cent of a house's value on up to ten times a mortgagee's salary – was expected to be huge. Yet remarkably few homeowners defaulted, bad debts have been well below expectations and the Northern Rock book turned out to be a relatively good one. So, the government, a most reluctant investor, ends up with a handsome profit and shareholders lose all. C'est la vie.
There are many lessons to be learned from this, not least that state intervention is not always a bad thing. The government also made a (modest) profit on the £22bn it pumped into Lloyds/HBOS a year later, although it will never recoup all the £57bn it pumped into RBS. It also took a number of other former building societies, such as Bradford & Bingley, into state ownership and has recouped its investment there. In all cases, depositors were saved, most of the banks survived to fight another day (Lloyds is today the biggest financial institution in Europe), and, most importantly of all, the financial system survived.
The biggest lesson however is that there never should have been a run on Northern Rock in the first place – and there wouldn’t have been if the Bank of England had provided it with funds at the outset. It was a fundamentally healthy bank which unfortunately relied too heavily on the wholesale and securitisation markets which dried up when the sub-prime crisis broke. Lloyds wanted to save it but the Bank’s governor, Mervyn King, refused to support it, quoting his widely discredited principle of “moral hazard” – if he bailed out Northern Rock, he insisted, other banks could behave even more recklessly knowing they had the same safety net.
A week later he had to turn tail and pump in the funds anyway.
The specs: 2018 Harley-Davidson Fat Boy
Price, base / as tested Dh97,600
Engine 1,745cc Milwaukee-Eight v-twin engine
Transmission Six-speed gearbox
Power 78hp @ 5,250rpm
Torque 145Nm @ 3,000rpm
Fuel economy, combined 5.0L / 100km (estimate)
The specs: Fenyr SuperSport
Price, base: Dh5.1 million
Engine: 3.8-litre twin-turbo flat-six
Transmission: Seven-speed automatic
Power: 800hp @ 7,100pm
Torque: 980Nm @ 4,000rpm
Fuel economy, combined: 13.5L / 100km
Skewed figures
In the village of Mevagissey in southwest England the housing stock has doubled in the last century while the number of residents is half the historic high. The village's Neighbourhood Development Plan states that 26% of homes are holiday retreats. Prices are high, averaging around £300,000, £50,000 more than the Cornish average of £250,000. The local average wage is £15,458.
Living in...
This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.
Milestones on the road to union
1970
October 26: Bahrain withdraws from a proposal to create a federation of nine with the seven Trucial States and Qatar.
December: Ahmed Al Suwaidi visits New York to discuss potential UN membership.
1971
March 1: Alex Douglas Hume, Conservative foreign secretary confirms that Britain will leave the Gulf and “strongly supports” the creation of a Union of Arab Emirates.
July 12: Historic meeting at which Sheikh Zayed and Sheikh Rashid make a binding agreement to create what will become the UAE.
July 18: It is announced that the UAE will be formed from six emirates, with a proposed constitution signed. RAK is not yet part of the agreement.
August 6: The fifth anniversary of Sheikh Zayed becoming Ruler of Abu Dhabi, with official celebrations deferred until later in the year.
August 15: Bahrain becomes independent.
September 3: Qatar becomes independent.
November 23-25: Meeting with Sheikh Zayed and Sheikh Rashid and senior British officials to fix December 2 as date of creation of the UAE.
November 29: At 5.30pm Iranian forces seize the Greater and Lesser Tunbs by force.
November 30: Despite a power sharing agreement, Tehran takes full control of Abu Musa.
November 31: UK officials visit all six participating Emirates to formally end the Trucial States treaties
December 2: 11am, Dubai. New Supreme Council formally elects Sheikh Zayed as President. Treaty of Friendship signed with the UK. 11.30am. Flag raising ceremony at Union House and Al Manhal Palace in Abu Dhabi witnessed by Sheikh Khalifa, then Crown Prince of Abu Dhabi.
December 6: Arab League formally admits the UAE. The first British Ambassador presents his credentials to Sheikh Zayed.
December 9: UAE joins the United Nations.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Volvo ES90 Specs
Engine: Electric single motor (96kW), twin motor (106kW) and twin motor performance (106kW)
Power: 333hp, 449hp, 680hp
Torque: 480Nm, 670Nm, 870Nm
On sale: Later in 2025 or early 2026, depending on region
Price: Exact regional pricing TBA
Like a Fading Shadow
Antonio Muñoz Molina
Translated from the Spanish by Camilo A. Ramirez
Tuskar Rock Press (pp. 310)
COMPANY PROFILE
Name: Kumulus Water
Started: 2021
Founders: Iheb Triki and Mohamed Ali Abid
Based: Tunisia
Sector: Water technology
Number of staff: 22
Investment raised: $4 million
MATCH INFO
Brescia 1 (Skrinia og, 76)
Inter Milan 2 (Martinez 33, Lukaku 63)
The National's picks
4.35pm: Tilal Al Khalediah
5.10pm: Continous
5.45pm: Raging Torrent
6.20pm: West Acre
7pm: Flood Zone
7.40pm: Straight No Chaser
8.15pm: Romantic Warrior
8.50pm: Calandogan
9.30pm: Forever Young
What are the influencer academy modules?
- Mastery of audio-visual content creation.
- Cinematography, shots and movement.
- All aspects of post-production.
- Emerging technologies and VFX with AI and CGI.
- Understanding of marketing objectives and audience engagement.
- Tourism industry knowledge.
- Professional ethics.
How much do leading UAE’s UK curriculum schools charge for Year 6?
- Nord Anglia International School (Dubai) – Dh85,032
- Kings School Al Barsha (Dubai) – Dh71,905
- Brighton College Abu Dhabi - Dh68,560
- Jumeirah English Speaking School (Dubai) – Dh59,728
- Gems Wellington International School – Dubai Branch – Dh58,488
- The British School Al Khubairat (Abu Dhabi) - Dh54,170
- Dubai English Speaking School – Dh51,269
*Annual tuition fees covering the 2024/2025 academic year
The five pillars of Islam
1. Fasting
2. Prayer
3. Hajj
4. Shahada
5. Zakat
Blackpink World Tour [Born Pink] In Cinemas
Starring: Rose, Jisoo, Jennie, Lisa
Directors: Min Geun, Oh Yoon-Dong
Rating: 3/5
Essentials
The flights
Emirates and Etihad fly direct from the UAE to Geneva from Dh2,845 return, including taxes. The flight takes 6 hours.
The package
Clinique La Prairie offers a variety of programmes. A six-night Master Detox costs from 14,900 Swiss francs (Dh57,655), including all food, accommodation and a set schedule of medical consultations and spa treatments.
A MINECRAFT MOVIE
Director: Jared Hess
Starring: Jack Black, Jennifer Coolidge, Jason Momoa
Rating: 3/5
Squads
India (for first three ODIs) Kohli (capt), Rohit, Rahul, Pandey, Jadhav, Rahane, Dhoni, Pandya, Axar, Kuldeep, Chahal, Bumrah, Bhuvneshwar, Umesh, Shami.
Australia Smith (capt), Warner, Agar, Cartwright, Coulter-Nile, Cummins, Faulkner, Finch, Head, Maxwell, Richardson, Stoinis, Wade, Zampa.
UAE tour of the Netherlands
UAE squad: Rohan Mustafa (captain), Shaiman Anwar, Ghulam Shabber, Mohammed Qasim, Rameez Shahzad, Mohammed Usman, Adnan Mufti, Chirag Suri, Ahmed Raza, Imran Haider, Mohammed Naveed, Amjad Javed, Zahoor Khan, Qadeer Ahmed
Fixtures and results:
Monday, UAE won by three wickets
Wednesday, 2nd 50-over match
Thursday, 3rd 50-over match
