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Government to Withdraw Guarantee on Nationalised Bank Savings

Wed, 10 Feb 2010

Northern Rock is set to withdraw the guarantee on savings deposits in a move designed to augment the sale of the state owned bank . The Chancellor provided the 100 per cent guarantee in September 2007 in an attempt to halt the run on the bank, though the reverse announcement is expected in the coming weeks. A three month notice is expected to accompany the withdrawal of the guarantee, after which point customers will revert to the protection of the Financial Services Compensation Scheme .

Under the Scheme, consumer savings accounts are covered to up to £50,000, or £100,000 for a joint account. The life long coverage of the scheme will include bonds, ISAs and savings accounts taken out with Northern Rock since September 2007.

Northern Rock is seen by many as the UK’s safest bank given the 100 per cent guarantee, while the government’s decision to split the bank into a good and a bad bank has left the good bank in a strong position. Despite receiving another £8 billion from the government to help back deposits and fund new lending, Northern Rock hasn’t chased consumers with low interest rates .
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