In 1983, Adam Applegarth joined Northern Rock as a graduate trainee. He became Executive Director in 1996 and Chief Executive in 2001 at the age of 39, the youngest FTSE 100 chief executive. In 2006 he was paid nearly £1.4m, including a £660,000 bonus. He left in December 2007, with a £760,000 payoff, several months before the government was forced to nationalise the bank.
He denied that the company’s stress-testing measures, as required by the Financial Services Authority, were inadequate, also that there was problem with a 50% increase in the number of mortgages they offered.
The bank had been tested to see if it could withstand a 40.0% fall in house prices but not the impact of a dramatic drying up of the wholesale lending market, from which Northern Rock derived 75.0% of its funding. The lack of appetite for short-term lending, driven by the subprime crisis in the U.S., meant Northern Rock was forced to borrow from Bank of England at a high penalty rate
On 14 September 2007 when the BoE liquidity became known, there was a run on the bank – the UK’s first in 150 years – where depositors lined up outside the bank to withdraw all of their savings as quickly as possible, particularly since everyone else was doing the same.
The following day, 15 April, Applegarth was quoted as saying:“Nobody could see the squeeze on global liquidity. Nobody could claim they saw it coming”, adding that because of the lending freeze Northern Rock did not have access to borrowing facilities.
It was taken into public ownership in 2008, and was then bought by Virgin Money in 2012. During 2012 the Northern Rock brand was phased out and replaced by Virgin.