24/02/2010

Northern Rock Closer To Independence

Northern Rock has reached an "important milestone" in its return to independence, the UK Treasury said today.

According to the government, the bank has stepped closer to "commercial strength" with notice given for the end of the special guarantee on retail deposits.

The deposits 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 restructuring of the bank on 1 January.

Financial Services Secretary to the Treasury, Paul Myners said: "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."

He said the Treasury had 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," said the Secretary.

"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.

Throughout the financial crisis, not a single retail depositor with a UK bank has lost any of their savings, the Treasury has said.

(PR/GK)

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