Guarantee extended to all Rock deposits
A GUARANTEE put in place to protect customers of ailing banking group Northern Rock was extended today to cover all new deposits.
The Treasury said the new agreement would give the company breathing space as it continues to pursue “the full range of its strategic options”.
Northern Rock will pay an “appropriate fee” for the extension of the Government guarantee to ensure that it does not receive a commercial advantage.
Northern, which is in discussions with possible bidders, said in a statement: “Accordingly, all retail savings - for both existing and new depositors - remain guaranteed, safe and secure.”
Yesterday reports said the troubled bank has been offered a financial lifeline worth up to £10bn. US banking giant Citi is believed to be prepared to lend the bank between £5bn and £10bn to help ease its funding crisis.
Today the bank said: “Northern Rock previously announced that it has received a number of approaches regarding a variety of potential transactions.
“While discussions continue with selected parties, Northern Rock emphasises that there can be no certainty as to their outcome.”
The bank added it had appointed Citi alongside Merrill Lynch to advise it on the range of options for the future of the company.
The news comes today as Britain’s financial watchdog faced a grilling over its failure to head off the Northern Rock crisis.
Hector Sants and Sir Callum McCarthy - respectively chief executive and chairman of the Financial Services Authority (FSA) - are to be quizzed by the Treasury Select Committee.
MPs will challenge them on how they allowed Northern Rock’s situation to deteriorate to such an extent that the UK saw its first run on a bank in 150 years.
The crisis - sparked by turmoil in the international credit markets - was quelled only after Chancellor Alistair Darling stepped in to guarantee people’s savings.
Northern Rock bank is now believed to have borrowed more than £10bn from the Bank of England, which agreed to act as ‘lender of last resort’ to stop it collapsing.
Last month, BoE governor Mervyn King appeared before the committee.
