Northern Rock savers ignore pleas for calm
Savers at Northern Rock have ignored pleas for calm and queued for a second day outside branches across the UK to empty their accounts.
Long lines formed even before counters opened as worried customers sought to withdraw money despite reassurances from the bank over the safety of their savings.
Some experts are now suggesting that as a brand name Northern Rock is doomed, predicting that it will disappear from the High Street within a year.
Customers are believed to have already withdrawn about £1bn (€1.4bn) in savings since the news on Thursday evening that Northern Rock had sought emergency funding from the Bank of England.
The UK’s fifth largest lender had been struggling with cashflow problems following a drying up of the money market – a process in which banks lend to each other.
But the decision by the Bank of England to bail out Northern Rock with emergency funding has provoked panic among some of its 1.5 million savers.
Despite reassurances that their money is safe, many have raced to remove their cash from the beleaguered bank.
The British Bankers’ Association yesterday urged customers to “calm down”.
It said: “Northern Rock is a sound and safe bank and there is absolutely no reason for either mortgage customers or savers to worry.”
Chancellor Alistair Darling said the Bank of England had stepped in “to create a stable banking system”.
He said: “People can use their accounts in the usual way, they can carry on making their mortgage payments in the usual way. Northern Rock will be able to carry on its business.”
Northern Rock chief executive Adam Applegarth said yesterday that the bank had yet to draw on the emergency cash, which he called “a backdrop in case we need to use it”.
But evidence suggests that such words have failed to calm the nerves of Northern Rock savers.
Customer Jane Taylor, queueing outside the Kingston-upon-Thames branch, told Sky News today: “It is the sugar shortage – people are going to rush to buy sugar from the supermarkets.
“Yes, we are making matters worse but I do think people need some reassurance from Northern Rock and the government and financial services that their money is safe.”
Northern Rock put on extra staff today to accommodate the surge of customers arriving at branches.
Financial expert Justin Urquhart Stewart, of Seven Investment Management, said customers should not panic.
He said Northern Rock was “no Barings Bank” and that it had huge assets and the Bank of England behind it.
“It is not in anyone’s interest for it to go bust. But despite that some individuals are saying ’I’m going to take the money out’,” he said.
Mr Urquhart Stewart added that as a High Street name, Northern Rock would be gone within 12 months, such was the impact of the crisis on its brand.
“It is a great shame. A perfectly good business will be strangled by circumstances,” he added.
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