Northern Rock guarantee terms published

by Gill Montia

Story link: Northern Rock guarantee terms published

The Treasury has published details of its guarantee to existing Northern Rock savers.

It will cover all accounts existing at midnight on Wednesday September 19th and guarantees future interest payments, movements of funds between existing accounts, and new deposits into existing accounts.

The guarantee will also be extended to accounts closed between September 13th and September 19th, inclusive and thereafter re-opened.

It is rumoured that up to 75,000 of Northern Rock’s 1.5 million savers have closed their accounts in the last seven days.

New accounts opened after September 19th (excluding re-opened accounts) will not be covered because the Treasury deems this to be unfair to other banks and building societies.

The guarantee does not extend to Northern Rock’s covered bonds, its Granite securitisations or any other hybrid debt, because these are held by institutional investors.

In terms of time span, the guarantee will remain in place during what the Treasury refers to as the ‘current instability in the financial markets’, as defined by the Bank of England, the Treasury and the Financial Services Authority.

Shares in Northern Rock fell again today as Standard & Poor, the credit rating agency, cut the bank’s ratings, and hopes of a takeover receded.