Northern Rock withdraws savings deals

Nationalised bank Northern Rock has had to withdraw some of its savings deals after a flurry of deposits has put it close to breaching state ownership rules.

Since it was nationalised in February, Newcastle-based Northern Rock has been offering some of the best savings rates, making it highly attractive for concerned savers to put their money.

However, due to the financial turmoil and the nationalisation of Bradford & Bingley, it has seen a ‘sizeable inflow’ of deposits over recent days, and as part of the commitment when it was nationalised, it must cap its market share of UK retail deposit balances at 1.5%.

According to experts, if the flow of savings continues at the current rate, it will have to close its doors in order not to exceed the 1.5% market share.

With immediate effect, products withdrawn to new customers include Silver Savings, Silver Savings 30, Business Reserve and a range of fixed-rate bonds.

Northern Rock has assured existing customers that the announcement will not affect them and they can continue to deposit money.

The announcement comes after the Government of Ireland said earlier this week it will guarantee the deposits and debts of the country’s banks for the next two years.

The Irish scheme covers Allied Irish Bank, Bank of Ireland, Anglo Irish Bank, Irish Life and Permanent, Irish Nationwide Building Society and the Educational Building Society.

Following the announcement, Irish-owned banks have seen a flurry of deposits as savers see it as a more secure way of guaranteeing their funds should their bank go bust.

Northern Rock was hit by a shortage of funds as a result of the credit crunch last September.

After rejecting takeover bids from the board of Northern Rock and a consortium led by Sir Richard Branson’s Virgin Group, the Government rushed through legislation to nationalise the bank in February.

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