Page 40 - TSB G Case Study

Challenger Fund

The 2008 global financial crisis changed the landscape of

banking especially in the U.K. where “UK banks printed

too much money and racked up bad debts in the shape

of mortgages, credit lines and personal loans to

consumers unable to repay their debts.” (12)

The Bank of England was forced to intervene to save

Northern Rock in autumn 2007, triggering panic as

customers queued for hours to withdraw their savings.

Northern Rock was nationalised in February 2008 and

this was soon followed by the nationalisation of Lloyds

TSB, Royal Bank of Scotland and HBOS in October, in a

bid to avert a collapse in the banking system.

Bank share prices plummeted and their all-important
dividend payments were slashed or suspended. The ‘Big

Five’ also had to face the emergence of ‘challenger banks’

who were capitalising on the growing disillusionment

with the big banks.

The challenger banks chose their areas of specialism and

entered the niche markets neglected by the big banks e.g.

buy-to-let, small and medium enterprise funding, or asset

finance. They also put in place far more robust

underwriting standards for credit and mortgages.