Northern Rock takes another step towards independence
An important milestone has been reached in Northern Rock's return to independent, commercial strength with notice given today for the end of the special guarantee for the bank's retail deposits. The Treasury has announced that the guarantees for retail deposits in Northern Rock plc will be lifted three months from today on close of business, 24 May. The guarantee for wholesale borrowings of Northern Rock plc, to the extent it relates to sums which are attributable to retail deposits made with Northern Rock (Guernsey) Limited, will also be lifted at the same time. Fixed term deposits in existing accounts will be guaranteed to maturity. Today's announcement follows the successful restructuring of the bank on 1 January.
Financial Services Secretary to the Treasury Paul Myners said: "The Government's actions to stabilise Northern Rock protected the savings of millions of families and the jobs of thousands of workers. The guarantee of retail deposits was a vital step that restored confidence in Northern Rock's operations when its customers were worried about its soundness.
"Over the last two years, we have worked to get the bank back to financial health. We have taken a number of important steps, most recently to divide the bank into a retail business that will be sold back to the private sector in due course, and an asset management company that will remain in Government ownership. Our goal is to see the taxpayer get a good return on its investment in the bank and for Northern Rock to focus on providing an excellent service to its customers.
"Today's announcement shows how far we have come. Depositors can have confidence in Northern Rock."
After the guarantee is lifted every Northern Rock retail customer will continue to have the first £50,000 of their total deposit protected by the Financial Services Compensation Scheme (FSCS), whether their deposit is fixed-term, non-fixed term or a combination of both. This is the same level of protection that is provided for retail customers of all banks and building societies in the UK. Customers of Northern Rock (Guernsey) will continue to benefit from the Guernsey Banking Deposit Compensation Scheme. The guarantee applying to Northern Rock's retail deposits was put in place as a temporary measure during a period of unprecedented instability in the financial markets. It was never intended to be permanent. The Government had undertaken to give at least three months notice before lifting the guarantee as it has today.
Throughout the financial crisis, not a single retail depositor with a UK bank has lost any of their savings.
Today's announcement does not affect the status of wholesale deposit guarantees for Northern Rock, except guarantees covering certain wholesale borrowings of Northern Rock plc attributable to retail deposits made with Northern Rock (Guernsey).