GOVERNMENT guarantees on retail savings in Northern Rock, implemented in late 2007 to protect customer deposits in the wake of a panic-fuelled run on the bank, are to be pulled from the end of May, the Treasury confirmed yesterday.
The withdrawal follows the restructuring of the now-nationalised bank into a “good” and “bad” bank at the beginning of the year; a move Northern Rock said yesterday had strengthened its capital and funding position to the extent that the guarantees are no longer required.
State guarantees on 100 per cent of savings in variable rate customer accounts will cease on 24 May, though existing fixed term accounts will be fully guaranteed through to maturity.
Under the independent Financial Services Compensation Scheme £50,000 of each saver’s money will continue to be secured – a sum which was bolstered last year to shore up confidence in the banking sector.
“This is a positive step in our return to normal business, and ensures that we compete on the same terms as other banks and building societies,” Northern Rock told savers in a statement.
Northern Rock is currently in the process of attracting a buyer for its healthy savings and loan book, under European Commission requirements for the bank to be sold off to address competition issues thrown up by its state bailout in 2007.
Sir Richard Branson’s Virgin Money has expressed an interest as a possible suitor for the bank, while other parties thought to be circling include National Australia Bank and Tesco Bank.