Fool.co.uk: Statement by the Chancellor of the Exchequer on financial markets

David Kuo, Head of Personal Finance at Fool.co.uk, says: “We welcome HM Treasury’s announcement to safeguard all existing deposits at Northern Rock during the current troubles in the banking sector.

The initiative should help stem the outflow of cash from Northern Rock that has not only created instability at the bank but has caused strains at other institutions too.

“The move will help reassure depositors, who have been needlessly distressed by senseless procrastination by the Government and the Bank of England. The authorities have badly misjudged the frame of mind of bank customers who are behaving in the only way they know how, namely to safeguard their assets.

“The Government now needs to quickly reassure customers at other banks by underwriting their deposits too. It must act swiftly to avert unnecessary aftershocks because bank customers need to be absolutely sure that money deposited at any bank is secure, not only at Northern Rock.

“If they don’t, then they are underestimating the mood of the public, who need immediate reassurance that the Bank of England will not only be a lender of last resort to troubled banks but also a guarantor of the first order to worried customers."