The HM Treasury has confirmed that the guarantee arrangements for existing deposits in Northern Rock PLC will cover all accounts in existence at midnight on Wednesday, September 19.
The guarantee covers future interest payments, movements of funds between existing accounts and new deposits into existing accounts.
It will also cover accounts re-opened in the future by customers who terminated Northern Rock accounts between Thursday, September 13 and Wednesday, September 19, inclusive.
In order to act in a way that is fair to other banks and building societies, the arrangements will not cover any new accounts set up after September 19.
If wholesale market funding is found for Northern Rock PLC, the Treasury will cover existing and renewed wholesale deposits, and existing and renewed wholesale borrowing that is not collateralised.
Other debt instruments including covered bonds, securities issued under the ‘Granite’ securitisation programme, and subordinated and other hybrid capital instruments, would not be covered under the guarantee.
Following talks with the Treasury Secretary, Henry Paulson, on September 17, Chancellor of the Exchequer, Alistair Darling, said: “Northern Rock is solvent and with a sound long-term loan book, but has had short-term liquidity difficulties.”
“The support I authorised the Bank of England to offer Northern Rock last week is designed to overcome these short-term difficulties, and to enable it to do its business in the normal way,” he added.
Find out more about Northern Rock savings accounts