Northern Rock savers to lose 100% guarantee

The 100 per cent savings deposit guarantee offered by Northern Rock is to be scrapped in three months time, it has been reported.

According to the Treasury, the guarantee will be removed on May 24th, meaning only the first £50,000 of any consumer's money will be secure in the event of a collapse - the standard guarantee under the Financial Services Compensation Scheme.

The guarantee was introduced in September 2007 to increase consumer confidence and prevent a run on the bank as it encountered credit crunch difficulties.

Financial services secretary Lord Myners commented: "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."

Earlier this year, Northern Rock was split into two – essentially creating a 'good' bank and 'bad' bank ahead of an intended sale back to the private sector.

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2010-02-24 13:40:47 © Moneyextra.com