Who is covered by the Treasury guarantee over Northern Rock savings?

Over the past week Northern Rock has suffered huge problems after it was revealed that the bank had taken a loan from the Bank of England.

Despite assurances from the government and from Northern Rock that the company was still solvent and financially sound savers flocked to the branches of the bank for days, queuing to take out their money, with billions being withdrawn by many of its 1.5 million savers. Share prices also plummeted leaving the future looking very bleak for the bank.

Earlier this week the Treasury decided to step in, and in addition to assuring consumers that it would not have considered lending money to a company that was not financially viable and stable, it also offered guarantees to savers to try and reduce the number of people hastily withdrawing their money from the bank amidst fears that Northern Rock would go bust.

The Treasury has now elaborated on its guarantee to ensure that consumers in the UK are clear with regards to who is covered and who is not. For those covered the government has guaranteed the safety of every penny of their savings. Bank accounts that were open as at midnight on 19th September, and any accounts that were closed and are now re-opened will be guaranteed. However, new accounts opened after this time will not be under the guarantee.

Officials stated: “This guarantee covers future interest payments, movements of funds between existing accounts, and new deposits into existing accounts. Since it would otherwise be unfair to other banks and building societies, the arrangements would not cover any new accounts set up after 19 September.”

Tom Smith
17th October 2007

Tags: england, treasury, northern, accounts, bank, savings