Darling guarantees Northern Rock savings

Chancellor Alistair Darling took action yesterday to ease panic and said the government would guarantee all savings at Northern Rock.

The same assurances will cover any other bank that suffers a similar crisis.

Mr Darling said the Treasury and the Bank of England "would put in place arrangements that would guarantee all the existing deposits in Northern Rock during the current instability in the financial markets.

"This means that people can continue to take their money out of Northern Rock. But if they choose to leave their money in Northern Rock, it will be guaranteed safe and secure."

Despite the reassurances, Northern Rock customers at a number of branches again started queuing early to get their money – many in line for a second day.

Northern Rock's chief executive Adam Applegarth welcomed the guarantee in a memo to staff.

"Anybody who is in a queue outside a branch, or who is trying to get access to an online account, can be fully reassured there is no case for concern whatsoever. Bloody hurrah!" he wrote.

Mr Darling's guarantee has eased pressures on the Northern Rock share price, which rose this morning, and other lenders, including Alliance & Leicester and Bradford & Bingley, who also saw rises.

The Treasury announcement came after a meeting between Mr Darling and his US counterpart treasury secretary Henry Paulson, which has led to suggestions the UK may follow the US's banking protection system, where 100 per cent of all savings are protected.

Previous protection under the Financial Services Compensation Scheme (FSCS) provides 100 per cent cover of savings up to £2,000 and 90 per cent of savings up to £35,000.

In a bid to bring savers back to Northern Rock, Mr Applegarth has promised those charged for withdrawing cash will have fees refunded if the same amount of money is reinvested in the same type of account by October 5th,2007.