Northern Rock Collapse?

Northern Rock Plc, the U.K.’s worst performing bank stock, will receive emergency funds from the Bank of England. this is to ease a credit shortage sparked by U.S. subprime mortgage defaults.

since the funding has been agreed its customers have been rushing to branches to withdraw money in a panic. they fear the worst for the bank and have withdrawn at least 2 billion pounds, about 8 percent of its retail deposits. the branches are too busy to serve most of the queuing customers, the website has also experienced problems as people rush to withdraw money.

northern rock lending
rising credit costs due to the US credit crunch left Northern Rock unable to make new loans, sparking the first rescue of a U.K. lender by the central bank in 34 years. The bailout stoked concern among investors and depositors that other financial firms relying on short-term money market credit rather than deposits from customers may be vulnerable because the rate they borrow at exceeds the amount they earn from lending.

bank of england
i think people are overly worried when they shouldn’t be. the bank of england would not lend money if they felt the northern rock would collapse. they must be sure that the funds they lend will be sufficient and WILL enable the bank to get back onto its feet.

the first £35,000 of savings you have with any bank are protected by the official Financial Services Compensation Scheme. so if you are overly worried and you have more than £35’000 of savings with northern rock, then take out the excess. i’m not sure if the thosuands of people withdrawing money are aware of this. unless they ALL have over £35’000 in their northern rock accounts!

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