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16.09.07, 12:51
Northern Rock customers withdraw £1bn
By: Harry Wallop, on: 16.09.2007 [08:41 ] (43 reads)
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Northern Rock customers withdraw £1bn
By Harry Wallop, Consumer Affairs Correspondent
Last Updated: 12:10am BST 16/09/2007
About £1 billion was withdrawn by panicking Northern Rock customers on Friday,
as fears for the bank's future sent shock waves through the City and caused
its shares to crash.
Customers outside a Northern Rock branch in Kingston Upon Thames
The company's phone lines were jammed for most of the day, its website crashed
and the 72 branches were besieged by thousands of worried customers after it
admitted having to ask the Bank of England for emergency funding.
The scenes came as the financial turmoil that has engulfed the money markets
in the past month spilled on to the High Street.
The Daily Telegraph understands from sources close to Northern Rock that the
panic generated by news of the emergency funding led to customers withdrawing
about £1 billion from their accounts. However, it is believed the bank
privately feared that this total could have been higher.
On a day of widespread concern over the economy:
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• Northern Rock's shares fell by 31 per cent, leading to the bank - the fifth
largest lender - being put up for sale.
• Other major lenders, including Bradford & Bingley, Alliance & Leicester and
Paragon, issued statements insisting they were not in similar trouble.
• The Chancellor appealed for calm and insisted that both the banking system
and the economy were stable.
The Bank's decision to help Northern Rock - by guaranteeing funds of up to
£31.5 billion - is the first time since 1973 that it has bailed out a High
Street lender.
Northern Rock tried to reassure its 1.4 million savers, 800,000 mortgage
holders, as well as its thousands of shareholders, that it was not in serious
danger.
Adam Applegarth, the chief executive, said: "In these extreme times we are
pleased to have a high-quality asset base and remain confident in the
excellence of our strong customer franchise, our efficient business platform
and our well-known brand."
However, his words failed to reassure thousands who queued outside the bank's
branches from early morning.
The bank has deposits exceeding £20 billion, so with about 1.4 million savers,
yesterday's withdrawals amounted to an average of about £700. Some branches
stayed open late to deal with the crowds and there were reports of fights in
one queue and even a confrontation with staff where police had to intervene.
In Cheltenham, Christopher Howard, 64, a former hotelier, and his wife Fiona,
48, refused to leave the bank until staff transferred their £1 million
savings, held in an online Northern Rock account.
A spokesman for the mortgage lender, which had £24 billion of savers' deposits
at the start of the week, said it had anticipated the customer reaction when
it approached the Bank of England.
"It is understandable that customers are concerned but the Bank of England,
the Treasury and the Financial Services Authority have all confirmed Northern
Rock is solvent," he said.
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The company said it had yet to use any of the Bank of England's facility but
analysts said it was only a matter of time.
Adam Applegarth, chief exec
Northern Rock is still writing new mortgages "albeit at a lower level than
usual", the spokesman said.
Savers' money was safe, financial experts said. But Martin Lewis, of the
website MoneySavingExpert.com, said this did not mean people should
necessarily keep their money with the bank.
"Almost all of Northern Rock's savings rates can easily be beaten by the best
buys on the market anyway. So this is a good occasion to check their rates and
ditch and switch to earn more elsewhere."
Rival lenders rushed to take advantage of the chaos in the mortgage market,
with both Abbey and First Direct offering eye-catching fixed rate deals.
However, others including Bradford & Bingley and Alliance & Leicester felt
compelled to issue statements saying they were unaffected by the chaos.
Paragon, a buy-to-let specialist, saw its shares fall 17 per cent but quashed
City rumours that it was next in line, saying it had "adequate" funding until
2008.
Opposition MPs said the crisis was the culimination of 10 years’ mismanagement
by the Gordon Brown-run Treasury and "reckless lending" by banks.
Angela Knight, the chief executive of the British Bankers’ Association, hit
back: "Everyone should calm down and refrain from making simplistic comments
in a very complex area which cause unnecessary concern. The British banking
system is carefully regulated and overseen which ensures that all banks
operate safely and prudently in the interest of their customers."
Alistair Darling, the Chancellor, said the fact that the Bank stepped in was
proof that the system was working efficiently.
Northern Rock’s shares fell 201p to close at 438p, as the company said its
profits would be almost £150 million lower than expected this year.
Its troubles caused a sell-off of banking and property company shares and the
FTSE 100 index of leading shares closed at 6,289 — a fall of 74 points or 1·17
per cent
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That is what the real British economy looks like..
by gmmonko on 16.09.2007 [10:24 ]
.25% Unemployment, statistically maintained to less than 6%. Millions of
homeless people and barely any industry.
Great Britain 2007 - a joke.
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