As of 1700 BST 24 May, the 100 percent guarantee on funds in Northern Rock bank has been removed. Those with accounts at the bank will have their funds guaranteed up to a maximum of £50,000 per person, just like all the other banking institutions in the U.K that are regulated by the FSA.
The guarantee of 100% insurance was brought in by the government as a means of reassuring the public and preventing a run on the bank when Northern Rock collapsed in 2007. It was always intended as a temporary measure, and now that the bank has limited its guarantee some members will probably choose to move their accounts to other places where they may get a better rate of return.
Gary Hoffman, Chief Executive of Northern Rock, said that the 100% guarantee would remain in place after May 24 on accounts with fixed rates, opened while the guarantee was still in place, that have not reached the end of their term – in some cases more than two years. For example, if you opened a five-year fixed rate account in 2008; all funds will still be guaranteed until 2013.
The bank is still under government ownership at present, but it has been decided that Northern Rock is in much better financial shape and the additional guarantee is no longer needed. Mr. Hoffman noted that this is a positive indication and that the bank is now returning to “a level playing field.” Northern Rock will now be offering the same level of protection as all the other banking institutions not backed by the government.