Page 295 - Bank Case Studies

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.