Case Study:

Once upon a time, nestled in the northeast of England, stood a bank known as Northern Rock. For years, it had been a beacon of financial stability and prosperity, offering mortgages and loans to families and businesses across the United Kingdom. Its success seemed assured, its future bright. But behind the fa$$ade of success lurked a perilous vulnerability, one that would soon shake the very foundations of the institution. It all began with whispers in the financial markets, murmurs of uncertainty and doubt. The winds of change were blowing, and Northern Rock found itself caught in the midst of a gathering

storm.As the year $2007$ unfolded, the storm clouds grew darker, fueled by a global financial crisis that sent shockwaves rippling through the world economy. Subprime mortgage defaults in the United States triggered a chain reaction, casting doubt on the stability of financial institutions far and wide.For Northern Rock, the crisis struck with devastating force. The bank had long relied on a precarious funding model, sourcing the majority of its funds from short$-$term wholesale markets. But as credit markets seized up and liquidity evaporated, Northern Rock found itself stranded, adrift in a sea of uncertainty.Customers, sensing trouble on the horizon, began to panic. Lines formed outside Northern Rock branches as depositors clamored to withdraw their savings, fearing the worst. The once$-$proud institution was now teetering on the brink of collapse, its fate hanging in the balance. Desperate to stave off disaster, Northern Rock turned to the only lifeline available: the government. In a dramatic move that sent shockwaves through the financial world, the UK government intervened to provide emergency funding to the ailing bank, effectively nationalizing it in the process. But the damage had been done, the trust of depositors shattered, and the once$-$mighty Northern Rock lay in ruins. Its assets were sold off, its operations wound down, leaving behind a legacy of loss and regret.The tale of Northern Rock serves as a cautionary reminder of the perils of hubris and complacency in the world of finance. In the blink of an eye, a once$-$thriving institution can be brought to its knees by the capricious whims of the market. And so$,$ the story of Northern Rock stands as a stark warning to all who dare to tread the treacherous waters of high finance: beware, lest you too fall victim to the merciless tide.

Questions: $1-$ Discuss why did Northern Rock go bankrupt?

$2-$ What were the steps taken by Central Bank and UK Government to save Northern Rock?

$3-$ What was the external factor which affected the Northern Rock?