‘Inadequate IT systems’ implicated in nationalisation of Northern Rock

The inadequacy of Northern Rock’s IT systems meant that the government had no choice but to nationalise the troubled mortgage lender and savings bank when it looked like it was about to collapse, according to a new report by the National Audit Office (NAO).

It might have been possible to ‘wind down’ Northern Rock’s business, the report said. That would have involved selling off branches and business units individually, and could have dissipated the threat to the national economy.

However, the bank’s process for closing accounts and returning depositors’ savings was a manual one, meaning that closing all the accounts would have taken months. A run on the bank would have probably occurred during that time, precipitating its collapse.

“The option of winding down the business was considered, but inadequate IT systems at Northern Rock meant that depositors would have had to wait for their money, risking another major run and potential hardship for those reliant on access to their funds,” the report said.

The IT factor was, however, just one of many conditions that led up to the nationalisation of Northern Rock. The NAO report concludes that the Treasury’s decision to nationalise the bank was unavoidable, lest the contagion spread to the rest of the UK economy.

Pete Swabey

Pete Swabey

Pete was Editor of Information Age and head of technology research for Vitesse Media plc from 2005 to 2013, before moving on to be Senior Editor and then Editorial Director at The Economist Intelligence...

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