The collapse and nationalization of the Northern Rock Bank by the UK government has opened up many debatable questions while highlighting the UK and the European financial systems. The crisis in this bank is an offshoot of the subprime crisis in the US. The nationalization of the bank brings into focus the eternal debate of moral hazard and protectionism.

In today's era of globalization, world markets are more integrated than ever before. While integration helps banks to promote international trade, set up business abroad and enables them to ensure uniformity and standardization in regulatory and compliance requirements, it also has its own risks. Global integration prevents countries and banks from being insulated against events in other parts of the world, especially from the US.

The price of real estate has gone up all around the world and when the price of the assets fell in the US, the ripple effect was felt around the globe. The subprime markets experienced a heavy wave of write_offs. Neither were the economies insulated nor were the banks that played in the subprime markets.

Though there were heavy losses reported by the European banks, none of the big banks faltered till date. Though the big European banks like HSBC, UBS and Société Générale were forced to write down billions of dollars in subprime losses prompting takeover rumors, these banks were able to weather the storm and are in the process of recouping themselves. However, this cannot be said about the UK-based Northern Rock Bank.

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