Chancellor rescues Northern Rock savers

by Gill Montia

Story link: Chancellor rescues Northern Rock savers

The Chancellor of the Exchequer, Alistair Darling, has reassured savers with Northern Rock by promising to guarantee all current deposits.

The move, in which the Chancellor pledged the support of the Government and the Bank England, is aimed at stemming the flow of withdrawals from the bank.

Mr Darling is reported as saying that he wants to put the matter beyond doubt because of the importance of maintaining a stable banking system and public confidence in it.

Northern Rock approached the Bank of England for emergency funding at the end of last week and around £2 billion has since been withdrawn by savers.

Some savers queued overnight on Monday to withdraw their money today and the bank’s Internet access has experienced difficulties because of the sheer volume of people trying to log on.

Northern Rock’s shares fell by 35% yesterday, following a similar fall on Friday of last week.

Opinions on whether this makes the bank a likely takeover target vary but given the damage to its reputation and lack of an extensive branch network, this seems unlikely.

The Chancellor’s reassurances are comprehensive. When asked what would happen in the worst-case scenario of the bank being broken up, Mr Darling replied: “Whatever happens, people can get their money out of the bank – they don’t need to worry about that.”