Other banks will not be hanging out birthday bunting following a seamless industry recovery, however. They have endured a miserable year..
All hell broke loose when it was revealed Northern Rock had asked the Bank of England for an emergency financial lifeline.
Northern Rock’s own main bank - the wholesale financial markets - had turned down its application for future loans. Fears about sub-prime lending had frozen those markets.
Unprecedented scenes in Britain followed as customers queued round the block clamouring to withdraw their money from branches.
Since the Northern fiasco the banks have been battered with massive losses or plummeting profits. Bank share prices have fallen off a cliff.
Red-faced U-turns on major balance sheet-repairing rights issues mean many shareholders don’t trust banks
.
The worldwide credit crunch means the banks don’t trust each other. The mortage industry is petrified, in more senses than one.
Clearly, Northern Rock cannot be blamed for a worldwide screeching of banking’s tectonic plates.
But it threw a pretty decent-sized spanner into those plates. Northern was a malign trendsetter.
After months of futile efforts by the shellshocked British authorities to flog a dead brand - to Lloyds TSB, hedge funds, Richard Branson, you name it - Northern was nationalised.
Only this week the trend caught on in America. US mortgage default giants Fannie Mae and Freddie Mac were also taken into de facto nationalisation by the government of the spiritual home of free markets.
Could a Northern happen again in Britain? Probably unlikely given the shock to the system the politicians, the Treasury, Financial Services Authority and Bank of England have suffered.
Could relatively smaller financial failures happen? Definitely. The FSA, for all its raft of new proposals to sharpen banking supervision, rightly admits there is no failsafe system when banks are lending and borrowing money and human fallibility is involved.
The regulators just want to dramatically lengthen the odds on failure. And have much, much better damage limitation systems in place when one does happen.
The so-called tri-partite authorities close their consultation on banking supervision reforms next Monday.
Reforms boil down to sharper, beefed-up supervision, a better ‘special resolution’ insolvency regime for banks, and an improved deposit protection scheme.
One hundred extra banking supervisors are being appointed by the FSA. Day-to-day supervision is to be increased, with minimum-number staff teams for each bank.
Senior management are also to get more involved, identified by the FSA as a Northern Rock weakness. Legislation to embody these changes should be on its way later in 2008.
All welcome. Better-late-than-never to close barn doors.
A postscript: it would also be nice if non-executive directors at Britain’s banks in future also felt bold enough to tell their own Adam Applegarth-like emperors (a rumoured £1.5m payoff for failure) about their new lending clothes.
A nation of customers who save and borrow money from banks, but haven’t a clue what securitisation is, would be most grateful.
