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Could the crisis at Northern Rock have been predicted? An evolutionary approach

Chick, V.; (2008) Could the crisis at Northern Rock have been predicted? An evolutionary approach. Contributions to Political Economy , 27 (1) pp. 115-124. 10.1093/cpe/bzn007.

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Abstract

Bankers have, from their beginning, made their money by taking risks and deciding how much risk they dare take, by expanding gradually, testing the water. Within this framework, the first risk is of illiquidity, but they must also ensure solvency. The steps taken by Northern Rock in developing their present ‘business plan’ are the same as those taken by most other banks, responding to the same incentives. It is the rapidity of its expansion that resulted in its downfall. The steps that have been taken also by other banks can be traced back to the beginning of banking and are predictable. Northern Rock's difficulties were predictable – and were predicted.

Type: Article
Title: Could the crisis at Northern Rock have been predicted? An evolutionary approach
DOI: 10.1093/cpe/bzn007
Publisher version: http://dx.doi.org/10.1093/cpe/bzn007
Language: English
UCL classification: UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of SandHS > Dept of Economics
URI: http://discovery.ucl.ac.uk/id/eprint/16241
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