Northern Rock savings guarantee to end
Northern Rock will lose the British government’s unlimited guarantee on its retail deposits on May 24, two-and-a-half years after suffering the first run on a UK lender since the Victorian era.
British Chancellor Alistair Darling announced the guarantee in September 2007 as an emergency measure to halt a run on the bank. The guarantee applied only to people holding accounts open at that point.
The removal reflects the increased strength of the bank following its taxpayer rescue, the Treasury said in a statement today.
The guarantee, which will no longer apply to variable-rate accounts, will continue on fixed-term accounts for their duration, according to the government.
“Today’s announcement shows how far we have come,” Treasury minister Paul Myners said in a statement. “Depositors can have confidence in Northern Rock.”
Northern Rock’s collapse prompted the British government to raise the maximum amount of savers’ deposits it will guarantee to £50,000 from £30,000.
“The decision reflects our good progress and the strong capital position of Northern Rock,” Chief Executive Officer Gary Hoffman said in a statement. “The company is returning to a level playing field.”