Northern Rock's Failure in Light of Banking Economics and Regulation IntroductionIncreasing global connectivity and integration in today's world ensures that almost everyone serious problems have global ramifications. The global financial system can serve as a key example of this phenomenon. Very recently, Northern Rock, Britain's fifth-largest mortgage lender, was rescued by emergency funding from the Bank of England. That made the Newcastle-based company the highest-profile British casualty of the global credit crisis triggered by the subprime mortgage crisis in the United States. The subsequent bank run at Northern Rock is unprecedented in recent UK monetary history. The Overend Guerney crash of 1866 was the last recorded bank run in the UK, before Northern Rock lost over £2 billion, as of 14 September 2007. Background The run on Northern Rock can be seen as indicative more vivid than the contagion that has consumed financial markets around the world. The company did not provide loans abroad. However, the spillover effects of the US mortgage market failure sealed the company's fate when the money markets on which Northern Rock had depended for years collapsed in early August 2007. The subprime mortgage market crisis began in the United States. Member States in the autumn of 2006 and turned into a global financial crisis in July 2007. Due to innovations in securitisation, the risks arising from these subprime mortgages had to be shared more widely with investors, which essentially led to ripple effects around the world. -large economy. Mortgages are typically repackaged into a variety of complex investment securities that are purchased by institutions to diversify their portfolios. In the case of the U... half of the paper... Northern Rock's ultimate fate is still undecided, although a consortium led by Virgin Group is the bank's preferred bidder. Virgin says it is rebranding the bank as part of the Virgin Money business and is proposing to repay £11 billion of the £25 billion loan the Bank of England lent to Northern Rock. While some are calling for the nationalization of banks to secure savers' deposits and provide affordable mortgages, the real debate revolves around the changes that need to be made to legislation and the regulatory issues that need to be addressed. Considering that a country's financial system is now fully integrated into a single global scheme and is subject to interdependence within the system, the price is too high for any country's economy for there to be any irresponsible risk tolerance by an individual. institution.