Northern Rock savers to lose 100% guarantee
The Treasury has today announced savers with Northern Rock will lose the Government’s 100% guarantee on 24 May.
The move means the crisis-torn bank is back in line with its rivals but savers will still benefit from the £50,000 guarantee to all savers under the Financial Services Compensation Scheme (FSCS).
The 100% guarantee was put in place after Northern Rock collapsed in the autumn of 2007 when savers staged a nationwide run on the bank. This signalled the onset of the banking crisis.
On 1st January, Northern Rock was split into two divisions – a “good bank” of profitable assets and “bad bank” of toxic debts.
The Treasury said the bank is now strong enough for the guarantees to be removed.
Treasury Minister, Lord Myners, comments: “The Government’s actions to stabilise Northern Rock protected the savings of millions of families and the jobs of thousands of workers.
“The guarantee of retail deposits was a vital step that restored confidence in Northern Rock’s operations when its customers were worried about its soundness,” added Lord Myners.
Lord Myners continued: “Today’s announcement shows how far we have come. Depositors can have confidence in Northern Rock.”
Commenting on the decision, Fiona Cornes of the Building Societies Association (BSA), said: “It helps return the savings market to normality and we will be able to compete more fairly now with one of the nationalised banks.”