Northern Rock Crisis Begins To Ease

The crisis over beleaguered bank Northern Rock appears to be calming down, as reports have indicated that queues of customers, anxious to withdraw their savings outside branches across the UK, have tailed off.

Earlier on Tuesday, Chancellor Alistair Darling pledged that the Bank of England (BoE) would underwrite all existing deposits, causing shares in the bank to rise again.

Northern Rock also took out newspaper adverts in an attempt to reassure customers.

Around £2 billion has been withdrawn from Northern Rock branches across the UK since last Thursday, when the firm applied for emergency funding from the Bank of England.

Northern Rock turned to the Bank as the "lender of last resort" after it struggled to raise money to fund its lending from commercial markets. However, the firm has stressed that it has not yet taken any of the funds made available to it by the BoE and also said that the Financial Services Authority considered it to be solvent.

There have been reports that Lloyds TSB had made a bid for Northern Rock, but that the deal had fallen through, reportedly because it had been blocked by regulators and the Bank of England.

Two other banks, rumoured to be HSBC and HBOS, are reported to be interested in acquiring Northern Rock.

Mr Darling said that the BoE's emergency loan would be transferred to any new owner if Northern Rock was sold and would be available for the length of its existing term, which was not quantified.

(KMcA)