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Page 5<br />
In the UK, the high-street bank<br />
Northern Rock was badly hit by<br />
concerns over the quality of its<br />
business.<br />
In September 2007, its depositors<br />
began queuing outside branches to<br />
withdraw their money.<br />
This was the first ‘run’ on a British<br />
bank since the 19th century.<br />
Northern Rock had to seek<br />
emergency loans from the Bank of<br />
England. It was nationalised by the<br />
Government in February 2008.<br />
The crisis worsened during 2008<br />
as the financial system cut back on<br />
the risky lending built up during<br />
the long credit boom.<br />
The position of many banks and<br />
insurers worsened, culminating<br />
in the high-profile collapse of<br />
the US investment bank Lehman<br />
Brothers, Bradford & Bingley in<br />
the UK and Hypo Real Estate in<br />
Germany.<br />
Bad debts<br />
increased<br />
The Bank of England responded<br />
with new measures to pump<br />
liquidity into the banking system.<br />
The Government provided large<br />
sums of public money to HBOS<br />
and the Royal Bank of Scotland.<br />
Problems<br />
spread<br />
rapidly<br />
Severe strains on the financial<br />
system tipped the global economy<br />
into recession as business<br />
confidence and demand collapsed<br />
towards the end of 2008.