Inadequate computer systems forced the Treasury to rule out winding down
Northern Rock, the building society taken over after a run on its funds,
according to a National Audit Office report.
The state of the computer system meant depositors would have had to wait for
their money, risking another major run, the fear that contagion would spread to
other financial institutions and potential hardship for those reliant on access
to their funds.
The current system required the manual closure of accounts, which would have
taken 10 to 12 weeks, with error rates of up to 25%, the NAO said.
The Bank of England, accountants Ernst and Young and Northern Rock management
worked to update the IT systems to enable quicker repayment of depositors money
if needed at a later date.
The NAO report criticised the Treasury for lacking procedures for taking over
a major institution but accepted nationalisation offered the best prospect of
protecting taxpayers’ interests.
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