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Relief as Northern Rock shares up Relief as Northern Rock shares up
(40 minutes later)
Shares in Northern Rock have recovered some ground after the government promised to protect savers' deposits.Shares in Northern Rock have recovered some ground after the government promised to protect savers' deposits.
Desperate to restore faith in British banks, Chancellor Alistair Darling pledged the Bank of England would guarantee all existing deposits.Desperate to restore faith in British banks, Chancellor Alistair Darling pledged the Bank of England would guarantee all existing deposits.
The unprecedented move lifted Northern Rock's shares by more than 6% and the number of worried savers queuing at branches to take their money out fell. The unprecedented move saw the queues of worried savers at branches wanting to withdraw their money fall, while Northern Rock's shares rose 6%.
Northern Rock has said it is "business as usual" in newspaper adverts. Northern Rock placed newspaper adverts promising it was "business as usual".
The rise in Northern Rock's share price comes after the bank has seen more than half of its value wiped out since Friday. The rise in Northern Rock's share price comes after the bank had seen more than half of its value wiped out since Friday morning.
Shares in other banks also recovered on Tuesday. Alliance & Leicester, which saw its shares fall by a third on Monday, was up 25%.Shares in other banks also recovered on Tuesday. Alliance & Leicester, which saw its shares fall by a third on Monday, was up 25%.
class="bodl" href="#shares">See what went wrong at Northern Rock The Bank of England also announced that it would inject £4.4bn into financial markets, offering cheap credit through a so-called emergency tender at a rate of 5.75%, in an effort to shore up crumbling confidence in the UK banking system.
The Bank of England also announced that it would inject £4.4bn into financial markets, offering cheap credit through a so-called emergency tender at a rate of 5.75% in an effort to shore up crumbling confidence in the UK banking system.
'Troubled times''Troubled times'
class="" href="http://newsvote.bbc.co.uk/1/shared/fds/hi/business/market_data/shares/3/23193/intraday.stm">Northern Rock shares price Northern Rock took out newspaper adverts to reassure its savers
Northern Rock took out a full-page newspaper advert in most of the major newspapers on Tuesday, emphasising that the company was "well-managed" and would not let its customers down.Northern Rock took out a full-page newspaper advert in most of the major newspapers on Tuesday, emphasising that the company was "well-managed" and would not let its customers down.
The advert contained a statement signed by the bank's chief executive Adam Applegarth designed to reassure savers.The advert contained a statement signed by the bank's chief executive Adam Applegarth designed to reassure savers.
"The simple fact is that the chancellor has made it clear that all existing deposits in Northern Rock are fully backed by the Bank of England and are totally secure during the current instability in the financial markets," he said."The simple fact is that the chancellor has made it clear that all existing deposits in Northern Rock are fully backed by the Bank of England and are totally secure during the current instability in the financial markets," he said.
If the run on Northern Rock isn't stemmed by the Government's decision to guarantee that no depositor will lose money, well then nothing will stem it BBC Business Editor Robert Peston See Robert Peston's blog
"These have been troubled times but Northern Rock will prevail.""These have been troubled times but Northern Rock will prevail."
The move came after three days of long queues at branches up and down the country as customers withdrew more than £2bn of their money - about 8% of Northern Rock's total deposits.The move came after three days of long queues at branches up and down the country as customers withdrew more than £2bn of their money - about 8% of Northern Rock's total deposits.
There were still queues of about 70 people at a Northern Rock branch in Golders Green and about 50 in Kingston-upon-Thames on Tuesday morning, as some worried savers were not placated by the government's reassurances that their savings were totally secure.There were still queues of about 70 people at a Northern Rock branch in Golders Green and about 50 in Kingston-upon-Thames on Tuesday morning, as some worried savers were not placated by the government's reassurances that their savings were totally secure.
But in its home town of Newcastle, the streets around the bank were quiet.But in its home town of Newcastle, the streets around the bank were quiet.
In the north east, there has been a general sense of support for the lender which employees about 4,500 people locally and has given donations worth about £175m to community organisations through its charity arm. In the north east, there has been a general sense of support for the lender, which employees about 4,500 people locally and has given donations worth about £175m to community organisations through its charitable foundation.
On Tuesday morning, former manager of Newcastle United Sir Bobby Robson said he would open an account at Northern Rock.On Tuesday morning, former manager of Newcastle United Sir Bobby Robson said he would open an account at Northern Rock.
'Solvent business''Solvent business'
The Financial Services Compensation Scheme that covers banks has come under fire as a result of the crisis.The Financial Services Compensation Scheme that covers banks has come under fire as a result of the crisis.
It protects 100% of the first £2,000 in any bank account and 90% of the next £33,000 - giving a maximum payout of £31,700 if a bank did go bust. FSA chief executive Hector Sants told the BBC's Radio 4 Today programme that he would be looking to improve the savers' guarantee scheme, which he said "has limitations", particularly with regard to larger deposits. It protects 100% of the first £2,000 in any bank account and 90% of the next £33,000 - giving a maximum payout of £31,700 if a bank did go bust.
FSA chief executive Hector Sants told the BBC's Radio 4 Today programme that he would be looking to improve the savers' guarantee scheme, which he said "has limitations", particularly with regard to larger deposits.
In a separate interview with the BBC, FSA chairman Callum McCarthy criticised Northern Rock's heavy reliance on short-term loans to fund its mortgage business as "extreme".In a separate interview with the BBC, FSA chairman Callum McCarthy criticised Northern Rock's heavy reliance on short-term loans to fund its mortgage business as "extreme".
He said the FSA required banks to "hold capital to deal with issues such as these".He said the FSA required banks to "hold capital to deal with issues such as these".
The comments come a day after he said the move by the chancellor was not designed to "save the Northern Rock per se".The comments come a day after he said the move by the chancellor was not designed to "save the Northern Rock per se".
"It's to make sure that there's not a negative effect on the banking system overall.""It's to make sure that there's not a negative effect on the banking system overall."
BBC Business Editor Robert Peston added: "If the run on Northern Rock isn't stemmed by the Government's decision to guarantee that no depositor will lose money, well then nothing will stem it."
Northern Rock applied to the Bank of England for emergency funding last week.Northern Rock applied to the Bank of England for emergency funding last week.
The bank has struggled to raise money to finance its lending ever since money markets seized up over the summer.The bank has struggled to raise money to finance its lending ever since money markets seized up over the summer.
Unlike most banks, which get their money from customers making deposits into savings accounts, Northern Rock is built around its mortgage business.Unlike most banks, which get their money from customers making deposits into savings accounts, Northern Rock is built around its mortgage business.
It raises most of the money which it provides for mortgages by borrowing from banks and other financial institutions.It raises most of the money which it provides for mortgages by borrowing from banks and other financial institutions.
WHAT'S HAPPENING AT NORTHERN ROCK? Mortgage lending Northern Rock lends a large amount for mortgages, and finances this with money from banks and savers Savings Northern Rock receives a relatively small amount of money from saversMoney markets Have stopped lending money to Northern Rock due to the crisis in the US sub-prime mortgage marketBank of England Steps into the breach to give Northern Rock an emergency loan Images: PA, Getty
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