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| Some relief as N Rock shares rise | Some relief as N Rock shares rise |
| (10 minutes later) | |
| Shares in beleaguered bank Northern Rock bounced almost 10% after the government's promise on Monday to protect savers' deposits. | Shares in beleaguered bank Northern Rock bounced almost 10% after the government's promise on Monday to protect savers' deposits. |
| Desperate to restore confidence in British banks, Chancellor Alistair Darling pledged the Bank of England would guarantee all existing deposits. | Desperate to restore confidence in British banks, Chancellor Alistair Darling pledged the Bank of England would guarantee all existing deposits. |
| The unprecedented move gave relief to other banks considered vulnerable, and stemmed share price falls. | The unprecedented move gave relief to other banks considered vulnerable, and stemmed share price falls. |
| Northern Rock has said it is "business as usual" in newspaper adverts. | Northern Rock has said it is "business as usual" in newspaper adverts. |
| Share in other banks also rebounded as trading on the stock market got under way. Alliance & Leicester, which saw its shares fall a third on Monday, rose 20%, while Bradford & Bingley climbed 9%. | Share in other banks also rebounded as trading on the stock market got under way. Alliance & Leicester, which saw its shares fall a third on Monday, rose 20%, while Bradford & Bingley climbed 9%. |
| 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%. | 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%. |
| 'Troubled times' | 'Troubled times' |
| The full-page newspaper advert taken out by Northern Rock in most of the major newspapers on Tuesday emphasises the company is "well-managed" and will not let its customers down. | The full-page newspaper advert taken out by Northern Rock in most of the major newspapers on Tuesday emphasises the company is "well-managed" and will not let its customers down. |
| It contains a statement signed by the bank's chief executive Adam Applegarth designed to reassure savers. | It contains 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," the statement says. | "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," the statement says. |
| "These have been troubled times but Northern Rock will prevail." | "These have been troubled times but Northern Rock will prevail." |
| The move comes 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 comes 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 on Tuesday morning waiting for the bank to open even after the government's unprecedented move to restore confidence in the British banking system. | There were still queues of about 70 people at a Northern Rock branch in Golders Green on Tuesday morning waiting for the bank to open even after the government's unprecedented move to restore confidence in the British banking system. |
| 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. |
| 'Solvent business' | 'Solvent business' |
| Banks are already covered by the Financial Services Compensation Scheme which 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. | Banks are already covered by the Financial Services Compensation Scheme which 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. |
| But under the measures unveiled by Mr Darling, Northern Rock savers would not lose a penny, regardless of how much they had deposited. | But under the measures unveiled by Mr Darling, Northern Rock savers would not lose a penny, regardless of how much they had deposited. |
| In effect, this would nationalise the Northern Rock if it went out of business, potentially leaving tax-payers to pick up the bill. | In effect, this would nationalise the Northern Rock if it went out of business, potentially leaving tax-payers to pick up the bill. |
| This has been criticised by the Conservative Party, but Mr Darling, the Treasury and the FSA have repeatedly said that Northern Rock is a solvent business. | This has been criticised by the Conservative Party, but Mr Darling, the Treasury and the FSA have repeatedly said that Northern Rock is a solvent business. |
| 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. | 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. |
| See what went wrong at Northern Rock | See what went wrong at Northern Rock |
| On Monday, FSA chairman Callum McCarthy told the BBC that the move by the chancellor was not designed to "save the Northern Rock per se". | On Monday, FSA chairman Callum McCarthy told the BBC that 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." |
| Even if a panic is irrational, if everyone else is rushing to get their money, it is quite rational to want to get your money before it runs out Evan Davis, BBC economics editor | Even if a panic is irrational, if everyone else is rushing to get their money, it is quite rational to want to get your money before it runs out Evan Davis, BBC economics editor |
| Mr Darling said that people could continue to take money out of the bank, but that if they choose to leave it there it would be secure. | Mr Darling said that people could continue to take money out of the bank, but that if they choose to leave it there it would be secure. |
| BBC economics editor Evan Davis said the chancellor's offer was a "dramatic step" and was, essentially a "money back guarantee". | BBC economics editor Evan Davis said the chancellor's offer was a "dramatic step" and was, essentially a "money back guarantee". |
| "Why have they done it? It's because panics can get out of hand," he said. | "Why have they done it? It's because panics can get out of hand," he said. |
| "And even if a panic is irrational, if everyone else is rushing to get their money, it is quite rational to want to get your money before it runs out." | "And even if a panic is irrational, if everyone else is rushing to get their money, it is quite rational to want to get your money before it runs out." |
| Northern Rock applied to the Bank of England for emergency funding last week, but said that it had not used any of the Bank's facility yet. | Northern Rock applied to the Bank of England for emergency funding last week, but said that it had not used any of the Bank's facility yet. |
| The Newcastle bank has struggled to raise money to finance its lending ever since money markets seized up over the summer. | The Newcastle 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 | 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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