In autumn of 2007 Britain experienced its first bank run of any significance
since the reign of Queen Victoria. The run was on a bank called Northern Rock.
This was extraordinary, for Britain had been free of such episodes because by
early in the third quarter of the 19th century the Bank of England had
developed techniques to prevent them. A second extraordinary aspect of the
affair was that it was the decision to provide support for the troubled
institution that triggered the run. And thirdly, unlike most runs in banking
history, it was a run only on that one institution. This paper considers why
the traditional techniques for the maintenance of banking stability failed - if
they did fail - and then considers how these techniques may need to be changed
or supplemented to prevent such problems in the future. The paper starts with a
narrative of the events, then turns to banking policy before the event and to
the policy responses after it. We suggest both why the decision to provide
support triggered the run and why the run was confined to a single institution.
That prepares the way for our consideration of what should be done to help
prevent the recurrence of such episodes in the future.