We consider the lessons that might be learned by other countries from the problems with
Northern Rock and the reactions of the UK authorities. We ask whether the surprise of the run on the
bank came because economic analysis did not provide the right guidance or whether it was simply a
problem of practical implementation. We conclude it was the latter and that as a result other countries
will want to review the detail of their deposit insurance and their regimes for handling banking problems
and insolvency. The relationships between the various authorities involved were shown to be crucial;
were a similar problem to occur in a cross-border institution the diffi culties experienced in the UK could
be small by comparison. |