Page last updated at 09:28 GMT, Tuesday, 5 August 2008 10:28 UK

Timeline: Northern Rock bank crisis

Alistair Darling announces the nationalisation
Alistair Darling desperately wanted to avoid nationalisation

Funding problems at Northern Rock, the country's fifth-largest mortgage lender, triggered the first run on a British bank in more than a century.

After months of uncertainty, the stricken bank has been nationalised, while the debate over who was to blame continues.

5 AUGUST 2008

Northern Rock announces bigger-than-expected losses of 585.4m for the first six months of the year.

Much of the loss came from the charges it takes to cover losses from struggling mortgage borrowers.

But it also managed to repay 9.4bn of its loan from the Bank of England, reducing the amount owed to 17.5bn.

The government, which nationalised the lender in February after the first run on a UK bank in more than a century, will inject 3bn to help its finances.

30 JULY 2008

Northern Rock says it expects to make about 1,300 staff redundant - fewer than expected - as part of its restructuring plans.

It hopes to limit the number of compulsory redundancies to 800, while 500 staff will leave voluntarily.

The bank says it expects to be left with an estimated 4,000 staff.

23 JULY 2008

Northern Rock appoints the vice-chairman of Barclays, Gary Hoffman, as its new chief executive.

Mr Hoffman replaces current chief executive Andy Kuipers, who will leave on 31 August after 20 years at the Newcastle-based lender.

Mr Kuipers is the final member of Northern Rock's original board to leave the bank after last year's crisis.

12 MAY 2008

Northern Rock says the UK mortgage market remains "uncertain" and arrears have increased.

The bank says mortgages in arrears for at least three months stood at 0.95% of total lending on 30 April, up from 0.57% on 31 December.

8 MAY 2008

Shareholders in Northern Rock launch a court challenge over compensation they are due to receive.

The UK Shareholders Association (UKSA) submits an application for a legal review into the terms of the Rock's nationalisation.

About 7,000 shareholders are backing the action, the UKSA says.

2 APRIL 2008

The EU says it will launch a full investigation into the UK government's bailout plan of Northern Rock.

Under EU rules, public support can be allowed to stop firms from going bankrupt, but long-term government aid that is seen to undermine competition is not permitted.

31 MARCH 2008

Northern Rock publishes results for 2007 showing a pre-tax loss of 167.6m and says it will be "significantly loss-making" in 2008.

It also pledges to repay its 24bn state loan by 2010 and reveals that former chief executive Adam Applegarth will get severance payments totalling 785,000.

26 MARCH 2008

The Financial Services Authority admits failures in its supervision of Northern Rock but says it should continue to have responsibility for regulating the banking system.

The FSA said there was "a lack of adequate oversight and review" by the agency of the troubled bank.

It said too few regulators were assigned to monitor Northern Rock, which ran into trouble in September.

The FSA said it would be overhauling its procedures as a result of the weaknesses identified.

19 MARCH 2008

Northern Rock says it will cut about 2,000 jobs and reduce its residential mortgage lending by half.

The job cuts, which account for about a third of its staff, will be made by 2011 under plans to turn around the ailing bank's fortunes.

The staff unions strongly protested the move.

6 MARCH 2008

The Northern Rock crisis could hurt the UK's financial services sector if it leads to any hasty new government regulations, the CBI warns.

Its director general Richard Lambert says any "seismic" changes could be as harmful as the US Sarbanes Oxley laws brought in after Enron collapsed.

And he said a government consultation document on reforming the banking system did not deal with all issues.

18 FEBRUARY 2008

Shares in Northern Rock are suspended.

Prime Minister Gordon Brown says the decision to nationalise is "the right move at the right time" and is one which "protects savers" and is in "the best interests of taxpayers".

Ron Sandler, the new chairman of Northern Rock, says it will take years for the bank to pay back its loans from the taxpayer but declines to comment on potential job losses.

Chancellor Alistair Darling says the nationalised bank will operate "at arm's length" from the government and says the bill to begin the nationalisation process will be launched in Parliament on Tuesday.

Shadow chancellor George Osborne tells MPs Mr Darling "is a dead man walking" and Conservative leader David Cameron says Mr Brown should remove Mr Darling from his role.

17 FEBRUARY 2008

Neither of the two proposals tabled for Northern Rock - one from a group led by Virgin and the other from in-house management - offer enough value to the taxpayer, Chancellor Alistair Darling announces.

Therefore, he says, the bank will be nationalised.

Ron Sandler is confirmed as the executive chairman of the Northern Rock.

15 FEBRUARY 2008

The board of Northern Rock, leading an in-house proposal to rescue the troubled bank, boosts its package, pledging to inject more cash into the bank by selling shares.

The offer submitted to the government and regulators says it will inject 700m, compared with 500m in its original proposal.

12 FEBRUARY 2008

The Virgin-led consortium is told by the Treasury that it is the frontrunner to take control of Northern Rock, the BBC learns.

But the Treasury sees nationalisation as a better outcome for the taxpayer and tells Virgin Group to improve the terms of its rescue plan.

It wants Virgin to offer more for the billions in financial support being provided by the government and a bigger potential stake in Northern Rock for the taxpayer.

7 FEBRUARY 2008

Northern Rock will appear on government accounts, the Office for National Statistics decides.

The move means the government may be at risk of breaking its rule to keep net debt below 40% of national income.

The ONS stresses that the statistical change to public status should not be confused with nationalisation.

6 FEBRUARY 2008

Northern Rock bosses and union leaders criticise Virgin Group's plans to cut jobs at the troubled bank.

The BBC learns that up to 1,000 jobs could go if the Treasury accepts Virgin's rescue proposals.

Virgin abandons a commitment to no redundancies because government-backed bonds to be issued by Northern Rock have to be repaid within three years.

Northern Rock's current management, which has submitted a rival plan, says it will fight to prevent job cuts.

4 FEBRUARY 2008

The deadline for offers for Northern Rock. Sir Richard Branson's Virgin Group and Northern Rock's own board both make rescue proposals for the bank.

Sir Richard Branson in New York
Sir Richard Branson felt it was his time to run the Rock.

They are the only two parties to submit proposals to the Treasury after investment fund Olivant pulled out, reportedly because the government wanted its 25bn of direct loans to Northern Rock repaid within three years.

Under the terms of its rescue plan, Virgin would inject 1.25bn into Northern Rock and take a stake of 55% in the firm.

Northern Rock's managers say their proposal - which gained shareholder backing - includes raising at east 500m, reducing the assets on the bank's balance sheet, and reorganising its operations.

26 JANUARY 2008

The Commons Treasury Committee says the Financial Services Authority was guilty of a "systematic failure of duty" over the Northern Rock crisis.

MPs say the UK's financial watchdog should have spotted the bank's "reckless" business plan.

They also call for the Bank of England to set up a head of financial stability.

The FSA says it has already admitted failings in relation to Northern Rock and insists it is "addressing" them.

21 JANUARY 2008

Chancellor Alistair Darling announces a plan to convert Northern Rock's 25bn Bank of England loan into bonds before selling them to investors.

The bonds would be guaranteed by the government to speed up a private sale of the troubled lender.

Potential bidders are given until 4 February to come forward with rescue proposals based on the Treasury's plans.

Northern Rock shares rise by about 42% on the news.

19 JANUARY 2008

The prime minister confirms that talks are taking place to secure a private sale of Northern Rock.

But Gordon Brown also says he has not ruled out the possibility of nationalising the bank.

One proposal suggested is to turn the billions of pounds of state loans made to Northern Rock into bonds, which would be sold.

The prime minister backs the scheme which is the brainchild of bankers Goldman Sachs.

15 JANUARY 2008

The BBC learns that the government has got a plan in place should the Northern Rock be taken into public ownership.

Legislation will be used, rather than the Treasury simply acquiring the firm in the conventional way, or allowing it to go into administration and then buying the assets.

Northern Rock clock
Many felt it was only a matter of time until the bank was nationalised

Earlier, about 600 Northern Rock shareholders attend a key meeting with management.

They vote against proposals put forward by Northern Rock's two biggest investors, hedge funds RAB Capital and Monaco-based SRM Global, that would effectively prevent the bank negotiating a sale without consent from its shareholders.

Northern Rock had urged shareholders to reject the resolutions - saying they would make securing a rescue deal much more difficult.

11 JANUARY 2008

Northern Rock agrees to sell 2.2bn, or 2%, of its mortgage assets to US investment bank JP Morgan.

The price represented a 2.25% premium of the value of the assets, which BBC Business Editor Robert Peston pointed out was encouraging.

It says it will use the funds to pay back some of the 25bn of emergency loans it has been given by the Bank of England.

8 JANUARY 2008

It emerges that SRM, a hedge fund that controls 9.9% of Northern Rock shares, has warned Alistair Darling not to consider nationalising the bank for less than a fair price.

In a letter sent to the chancellor before Christmas, SRM said it had been advised that otherwise there would be a breach of the Human Rights Act and it would have a strong case to pursue ministers through the courts.

4 JANUARY 2008

Chancellor Alistair Darling tells the Financial Times he is planning to give the Financial Services Authority more power to deal with failing banks to avoid another Northern Rock-style crisis.

He proposes giving the FSA the power to seize and protect customers' cash if their bank gets into difficulties.

21 DECEMBER 2007

Northern Rock agrees to hold an emergency meeting for shareholders to discuss its sale process on 15 January.

The meeting will be the first high-profile occasion for shareholders to grill management since the bank ran into trouble.

Two of the bank's major shareholders are calling for restrictions on the board's ability to sell the company's assets or issue new shares.

13 DECEMBER 2007

Northern Rock announces that its chief executive Adam Applegarth has left the company, earlier than planned.

12 DECEMBER 2007

Olivant threatens to abandon its attempted rescue of Northern Rock, citing frustrations over the negotiation process.

Northern Rock is dropped from the FTSE 100 index of leading London-listed blue chips, in the biggest shake-up of the index since the dotcom crash in 2001.

7 DECEMBER 2007

The Olivant group, led by former Abbey boss Luqman Arnold, unveils plans of its rescue proposal and says it could repay immediately up to 15bn of government money that is propping up Northern Rock.

26 NOVEMBER 2007

Northern Rock names a consortium headed by Virgin Group as its preferred bidder.

The Virgin offer includes an immediate repayment of 11bn of the 25bn the bank owes the Bank of England, with the remainder to be paid over the next three years.

RAB Capital, which is the second-largest shareholder in Northern Rock with a stake of about 6.7%, says it will oppose the move from Virgin.

16 NOVEMBER 2007

Northern Rock announces that chief executive Adam Applegarth has resigned.

It says he will step down from his post once he has helped the lender complete the second phase of its strategic review, which is scheduled for completion no later than the end of January 2008.

12 OCTOBER 2007

A consortium led by Sir Richard Branson's Virgin Group puts forward a proposal to rescue Northern Rock.

Under the plans, Northern Rock would keep its stock market listing but would be rebranded as Virgin Money.

9 OCTOBER 2007

The Treasury agrees to protect new savings deposited at Northern Rock.

The decision extends the previous guarantee, made the previous month, which covered deposits made up to 19 September.

The chief executive of the Financial Services Authority, Hector Sants, admits that there are "lessons to be learned" from the regulation of Northern Rock.

Appearing before the Treasury Select Committee, Mr Sants tells MPs: "In terms of the probability of this organisation getting into difficulty, we had it as a low probability."

1 OCTOBER 2007

Chancellor Alistair Darling announces that the scheme to protect savers with money deposited in UK banks is being expanded to guarantee 100% of the first 35,000 of savings.

He adds that this is the first stage of a wider reform of the compensation system.

25 SEPTEMBER 2007

Northern Rock announces that it is cancelling the dividend that it was due to pay shareholders in October. This would have cost the bank 59m.

The bank also says that it is in preliminary talks with people who want to buy all or part of its business.

20 SEPTEMBER 2007

Bank of England Governor Mervyn King
Mervyn King was under pressure to defend his actions before MPs

Mervyn King defends his handling of the banking crisis before MPs amid rumours that his job is on the line.

Facing accusations of "being asleep at the wheel", Mr King said it would have been "irresponsible" to have intervened earlier to save Northern Rock.

He says he would have liked to have offered financial support to Northern Rock in secret but that UK and EU regulations made this impossible.

19 SEPTEMBER 2007

The Bank of England says it will inject 10bn into the money markets to try to bring down the cost of inter-bank lending.

In another significant development, the assets that banks are allowed to use as collateral will be wider than usual, including mortgage debt.

Critics accuse it of a U-turn and say it should have acted sooner to help Northern Rock.

18 SEPTEMBER 2007

The chancellor's move appears to have its desired effect as the queues gradually disappear outside most branches.

In a series of newspaper adverts, Northern Rock says the firm has suffered "troubled times" but that "it will prevail and we will not let you down".

17 SEPTEMBER 2007

The sense of crisis surrounding Northern Rock grows as the queues at many of its 76 branches show no sign of dying down and the firm's shares plunge a further 40%.

There are growing fears this will undermine confidence in the whole banking system.

Just before 1800, Chancellor Alistair Darling dramatically intervenes to try to end the crisis by agreeing to guarantee all deposits held by Northern Rock.

He says savers will not lose a penny and that his action was motivated by the "importance I place on maintaining a stable banking system".

It also emerges that the Bank of England had been in talks with Lloyds TSB about possibly buying Northern Rock, but these discussions had foundered.

14 SEPTEMBER 2007

Northern Rock says "extreme conditions" in financial markets forced it to approach the Bank of England for assistance.

In a statement, the Bank, Treasury and FSA say they believe Northern Rock is solvent and that the standby funding facility will enable the bank to "fund its operations during the current period of turbulence in financial markets".

Queues of worried savers outside a Northern Rock branch
Customers said they preferred to be safe rather than sorry

Northern Rock boss Adam Applegarth stresses that it is "business as usual" for the firm.

But their comments do not reassure either analysts or customers.

The firm's shares plunge 32% in the City as worries about its future viability escalate.

Meanwhile, queues begin to form outside a number of Northern Rock branches with hundreds of worried savers seeking to withdraw their money.

Experts point out that current legislation only protects savings of up to 33,000 - guaranteeing a maximum payout of 31,700 - in the event of a bank collapse.

The bank's website collapses under the strain and all its phone lines are jammed.

13 SEPTEMBER 2007

The BBC reveals that Northern Rock has asked for and been granted emergency financial support from the Bank of England, in the latter's role as lender of last resort.

BBC Business Editor Robert Peston says Northern Rock is not in danger of going bust and there is no reason for its customers to panic.

But he adds that "the fact it has had to go cap in hand to the Bank is the most tangible sign that the crisis in financial markets is spilling over into businesses that touch most of our lives".

12 SEPTEMBER 2007

Mervyn King says the Bank of England would be prepared to provide emergency loans to any bank that ran into short-term difficulties as a result of temporary market conditions.

But he appears to rule out following the lead of the ECB and US Federal Reserve in pumping huge sums into the banking system to ease the liquidity drought.

4 SEPTEMBER 2007

The rate at which British banks lend to each other - known as the London Interbank Offered Rate (Libor) - rises to its highest level in almost nine years.

The three-month loan rate hits 6.7975%, above the Bank of England's emergency lending rate of 6.75%, suggesting that banks are reluctant to lend money to each other.

14 AUGUST 2007

Bank of England governor Mervyn King is alerted to the potential impact of the global credit squeeze on Northern Rock's business in a phone call with officials at the Financial Services Authority (FSA) and the Treasury.

9 AUGUST 2007

Global credit concerns are ignited by French bank BNP Paribas' decision to suspend three of its investment funds with exposure to the troubled US sub-prime market.

Share prices fall sharply as banks curb lending to each other and the European Central Bank (ECB) injects 94bn euros ($130bn; 65bn) of liquidity into the European banking system.

25 JULY 2007

Northern Rock issues an upbeat set of trading results, saying the outlook for the business is "very positive".

Market trader in the US
Problems on the global money markets hurt Northern Rock

It reveals it has sold mortgages worth a record 10.7bn in the first half of 2007, up 47% on the same period a year before.

This is equivalent to 19% of all new mortgage policies sold over that time, making it the market leader in the UK.

Interim profits are up 0.7% to 296m and the firm pledges to boost its dividend - its payment to shareholders - by 30%.

It notes that "sharp increases" in borrowing rates in the money markets are likely to make life more difficult and that changes in "interest rate and credit risk environments" will influence the size of its annual profits.

But it says its assets have grown 28% to 113bn, its new residential lending remains "low risk" and that sales growth from its core mortgage business remains good.




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