The use of inadequate IT systems at Northern Rock was a reason
the government decided not to let the bank go out of business, it
has emerged.
Northern Rock was forced to take an
emergency loan from Bank of England to prevent it breaching
solvency rules in September 2007when it was one of the first
casualties of the sub-prime mortgage crisis.
According to a National Audit Office report, the government did
not allow the company to wind up because it feared that customers
would have suffered.It instead nationalised the firm.
According to the report, "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 that using Northern Rock's computer systems it
would have taken 10 to 12 weeks to repay depositors with a likely
error rate of 25%.
Northern Rock also had problems with its website following the
trouble. Customers were unable to get reassurance from the
company's website during the crisis.