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Northern Rock savers lose 100% guarantee

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by Kay Mitchell

Savers with Northern Rock have today lost the 100% guarantee on their cash.

The move, which was announced back in February, 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.

A Northern Rock spokesman said: “The removal of the guarantee is another positive step for Northern Rock and reflects our strong capital and funding position. We are returning to a level playing field.”

However, there are concerns that the temporary measure will mean the Rock‘s savers could take their cash elsewhere.

Michelle Slade, of financial information service Moneyfacts, comments: “A lot of people did move to Northern Rock, even their uncompetitive products, because of the protection.

“It could now be that people who moved to it for that reason look to get better rates elsewhere,” she added.

Earlier this year Northern Rock was split into two divisions – a “good bank” of profitable assets and “bad bank” of toxic debts.

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News posted: May 24, 2010

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