Late last year there was a cartoon in the Daily Telegraph (UK) showing a bank cashier pointing a gun at a customer and saying ‘Leave your money where it is’.The sign above the cashier said ‘Northern Rock’. If you don’t live in the UK the fiasco surrounding Britain’s fifth largest mortgage lender may have gone unnoticed, but in Britain this was the first run on a bank since 1866. So what went so wrong?As recently as July, Northern Rock’s Chief Executive was publicly talking about a ‘robust’ credit book. Two months later the bank was effectively insolvent.But there were warning signs well before all this. For example, Business Week warned about the consequences of cheap money in February 2007 while in early March The Economist magazine commented that there might be trouble ahead when you can buy a book called ‘House Flipping for Dummies’ (‘Flipping’ being the American colloquial term for ‘doing up’ a property quickly, in order to sell it on). The issue with regard to Northern Rock is essentially that the bank used the global wholesale money markets to fund its growth rather than relying on the slower method of using its own local deposits. Interestingly, the bank did little or no business overseas but the connectivity of global lending meant that it was still exposed to far-away risk, specifically the complexity and confusion surrounding securitisation (that is, the process of turning debt into marketable securities). Implications? Securitisation and ‘structured’ financial products aren’t going away any time soon but what is likely is that there will be demands for greater transparency surrounding the securitisation process.