Support the Rock
Sep 18 2007 by Sam Wood, The Journal
Investors cash will be secured
THE Government last night promised to guarantee all money deposited with Northern Rock.
The bank said it will refund withdrawal charges to customers who have emptied their accounts if they wish to return.
The financial lifeline
emerged after business leaders yesterday demanded the Government provides real security to people worried about their savings.
Under the previous rules the maximum amount any customer could be guaranteed to be compensated should the bank go into administration was £31,700.
The limited security offered by the Financial Services Compensation Scheme had led customers to withdraw more than £2bn since Friday.
But after a day of pressure the Chancellor Alistair Darling finally promised the Government would step in to protect customers’ accounts if the bank collapsed.
Mr Darling said: "I want to put the matter beyond doubt. In the current market circumstances, and because of the importance I place on maintaining a stable banking system and public confidence in it, I can announce today that following discussions with the Governor and the Chairman of the Financial Services Authority, should it be necessary, we, with the Bank of England, would put in place arrangements that would guarantee all the existing deposits in Northern Rock during the current instability in the financial markets. This means that people can continue to take their money out of Northern Rock. But if they choose to leave their money in Northern Rock, it will be guaranteed safe and secure."
A spokesman for the Treasury said the Chancellor’s assurances would cover both existing customers and any opening accounts from today. In a statement to the Stock Exchange the bank welcomed the move, and added it was not currently discussing any takeover offers.
The bank said: "The Chancellor’s statement makes it clear beyond any doubt that all savings in Northern Rock are safe and secure.
"Consequently anybody who is in a queue outside a branch, or who is trying to access an online account can be fully reassured that there is no cause for concern whatsoever. Any customer who paid a penalty to withdraw their funds from Northern Rock, due to concern over the current situation, will have the penalty refunded if they reinvest those funds in the same type of account with Northern Rock by October 5."
In the hours leading up to the Chancellor’s announcement the North-East Chamber of Commerce had urged the Government to cover more than just the 90% of loses under £35,000. Chief Executive James Ramsbotham had called for the Mr Darling to "apply the brakes on customers’ knee-jerk reaction."
Mr Ramsbotham, pictured left, said: "Alistair Darling has come out strongly over the weekend in defence of Northern Rock and in support of the solidity of its business."
