Northern Rock's unlimited Government savings guarantee runs out today. Ministers have decided that, now the bank is out of immediate danger, it should be treated like any other bank. Savers are now only covered up to the £50,000 limit of the Financial Services Compensation Scheme. The Government is thought to be preparing the state-owned bank for an eventual sale to a private buyer.
Existing fixed-rate
savings accounts will continue to benefit from the unlimited guarantee until their agreed term expires.
Northern Rock’s Government-backed, 100% savings guarantee was designed to prevent it from launching competitive savings deals. If the bank had made best-buy launches while the guarantee was in place, competitors would have accused it of abusing its protected status. This is what happened with
National Savings & Investments in 2008.
Northern Rock has also benefitted from its “good” and “bad” components being split. The “good” bank part, which is issuing new
mortgages and
savings accounts, wants to improve its reputation and potentially attract a buyer.
A spokesman for Northern Rock said: “The removal of the guarantee is another positive step for Northern Rock and reflects our strong capital and funding position. We are returning to a level playing field.”
