A turnaround for the Rock?
October 8, 2008
Most people will clearly remember that this time last year the financial headlines were dominated with news about the stricken lender Northern Rock, which looked set to go under after it was found to have taken a huge emergency loan from the Bank of England. Within a very short space of time shares in the bank plummeted, worried consumers rushed to the bank to withdraw billions of pounds in deposits, and the Rock became the first victim of a run on a British bank in around one hundred and fifty years.
Earlier this year the Rock was rescued as the result of a government takeover after it was nationalised. However, in the space of a year there has been chaos in the financial markets and a number of banks have found themselves coming close to a similar situation as Northern Rock. In fact, one lender has just joined the Rock in becoming the second bank to be nationalised. The announcement that Bradford & Bingley was to be nationalised was made earlier this week, with the savings account arm of the company being bought by Abbey.
In the meantime, Bradford & Bingley and Northern Rock have not been the only victims of the global credit crunch. Very recently another major bank, HBOS, was taken over by banking giant Lloyds TSB, creating a superbank of immense proportions. However, the takeover has stirred concern amongst many consumers, with many worried that the takeover might collapse and HBOS would end up going under. This has had unexpected results for the first major victim of the crunch, Northern Rock, as many of the consumers that have taken money from HBOS and other high risk financial institutions have rushed to deposit their money in accounts at the Rock.
In fact, just one year on Northern Rock has seen something of a turnaround. Whilst this time last year people were flocking to take their money out from the Rock they are now flocking to put their money in. This is because many consumers are looking for the higher level savings guarantee that is offered at the Rock - a guarantee that is usually only available with National Savings & Investments. With other financial institutions the 100% guarantee on savings applies only to the first £35,000.
An official from Northern Rock confirmed that the bank had been much busier, as consumers try and achieve greater peace of mind over their money by putting it into an account with a greater safety net.
He said: ‘We’ve been busy and the feedback we’re getting from these new depositors is that they’re seeking safety and the elimination of uncertainty.’
Uncertainty in the financial markets in the UK remains very high, and many expect it to get much worse before it gets better. This could potentially see many more people yet rush to put their money in a Northern Rock account amidst fears over which bank or financial institution will find itself on the verge of collapse next.
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