Northern Rock forced to cut savings accounts

Just a year ago Northern Rock was being branded the victim of the first run on a British bank in almost 150 years, and customers were flocking to get to the bank and take out their cash amidst rumours that the bank was on the verge of collapse. However, since this time the bank has been nationalised and since falling into government hands now offers a 100% guarantee on savings deposits for customers – a guarantee that had previously only been available on National Savings & Investments.

The past month or so has seen a lot of turbulence and financial uncertainty in the banking sector, and with movements such as the takeover of HBOS by Lloyds TSB and the nationalisation of Bradford & Bingley it seems that many consumers simply don’t know what to do for the best when it comes to their savings. As a result of this many have been flocking to Northern Rock to put their money in an account that offers a 100% guarantee.

However, the situation has reached a point where Northern Rock has had to close more than half of its savings accounts products because of the number of people that are trying to open accounts. Due to competition the Rock has had to agree to limitations with regards to how much it will take in savings, because the 100% guarantee gives it an unfair disadvantage over other savings accounts.

Northern Rock is allowed to have no more than 1.5% of the savings market, but because of the rush of people trying to put money into the bank it has already come very close to this limit, and has therefore had to start turning people away and closing various accounts. All remaining products will continue to be monitored. One official from the Rock said: ‘As we said at our half year results, we have been growing our retail deposits. The inflow has increased in the last few weeks.’