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Northern rock savings accounts withdrawn

02 October 2008 / by Rachael Stiles
Northern Rock has had to withdraw most of the savings accounts that it offers in order to remain within the rules of its nationalisation deal which prevents abuse of competition advantage.

Following the withdrawal of its Fixed Rate Asset Bond and online E-Saver products from its savings accounts range recently, its Silver Savings, Silver Savings 30, Business Reserve and a range of fixed rate bonds are now also no longer available to new customers, effective as of today. It now offers just one in-branch savings account.

When it was nationalised by the Government earlier this year, part of the deal was that Northern Rock could not be seen to have an unfair advantage over its competitors as a result of being backed by the government.

As one of the few British banks that enjoys having its deposits backed 100 per cent by the government, Northern Rock savings accounts have seen a boom in business over recent weeks as consumers rush to make their savings secure. But, in what must seem like tough justice after what it's been through since it experienced the first run on a British bank for more than a century, Northern Rock is now being forced to turn customers away.

Customers have been drawn to Northern Rock's competitive interest rates – aimed at moving away from mortgage lending towards less risky retail deposits – because most other savings accounts are only guaranteed for the first £35,000, soon to be raised to £50,000.

The market share of UK retail deposit balances that Northern Rock is allowed to hold is 1.5 per cent. The announcement that it has withdrawn some of its savings range means that savers might move their money to National Savings & Investment, the Government's savings scheme, which also offers the 100 per cent guarantee.

A statement from Northern Rock said that "recent turbulence in financial markets has led to a sizeable inflow of retail deposits, particularly in recent days, and Northern Rock is therefore taking further action to moderate its product range and product pricing, to uphold its competitive commitments."

Other options for savers looking for ultimate security include banks which fall under Bank of Ireland rules, such as post office savings accounts, after the Irish Government announced it would guarantee 100 per cent of savings deposits in an attempt to stabilise the economy.

"Northern Rock retains a range of savings products and remains open for business." the statement said, but "The Company will continue to monitor closely the level of retail balances and manage both its product range and pricing in order to comply with its Competitive Framework."

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