Northern Rock has withdrawn a number of savings deals to new customers to ensure it does not abuse any competitive advantage.
The nationalised bank is one of few financial institutions that has a 100% guarantee for the safety B&B nationalisation 'last resort' ...
Britain's Lloyds Bank Seals Giant Merger ...
First German soldier killed in Afghanistan in over a year ...
Irish 'need new EU treaty vote' ...
German troops injured in Afghan attack ... of customers' savings, as it is government-backed.
On Thursday, it said that it had seen a "sizeable inflow" of deposits in recent days owing to financial turbulence.
It must cap its market share of UK retail deposit balances at 1.5%.
This commitment was made as part of the nationalisation deal.
The move comes as the Irish government confirmed legislation to guarantee the safety of 100% of savings at six institutions.
Savings shift
There have been widespread reports of savers moving their savings to financial institutions regarded as secure.
But savers setting up new accounts will generally have to wait a few days before they can put money in.
National Savings & Investments - the government's savings scheme - has a 100% guarantee, in the same way as Northern Rock.
A spokeswoman for NS&I said its call centre had seen "in increase in volumes of calls" in the last few weeks, but did not provide figures to show the level of the increase.
The Anglo Irish Bank said it had received a lot of calls from savers. The Irish government on Thursday guaranteed all of savers' deposits in six savings groups.
In the UK, only the first Ј35,000 is guaranteed but Prime Minister Gordon Brown said this was planned to be raised to the first Ј50,000.
The British Bankers Association said that official figures for the flow of money out of accounts on Wednesday would not be available for another 10 days.
UK payments association Apacs said on Wednesday that no significant peak has been spotted on transactions through the Chaps transmission service.
This service allows money to be transferred from one account to another in a day and is generally used for large sums of money.
Rock cuts
Northern Rock cut its Silver Savings, Silver Savings 30, Business Reserve and a range of fixed rate bonds on Thursday.
This follows the recent withdrawal of its Fixed Rate Asset Bond and online E-Saver products.
"The self-imposed framework is designed to ensure Northern Rock does not take unfair advantage of government support during the period of temporary public ownership," a spokesman said.
When it was nationalised, Northern Rock said it would limit its share of retail deposit balances to 1.5% of the market in the UK and 0.8% in Ireland. Its share of gross new mortgage loans would also be no more than 2.5% of the UK market, it said.
A number of media commentators advised savers to turn to Northern Rock at the weekend. Northern Rock does not advertise its 100% guarantee.
'Competitive framework'
Meanwhile, banking analyst Leigh Goodwin, of Fox Pitt Kelton, said that UK banks were clearly disadvantaged by the moves by the Irish government.
Alex Potter, Collins Stewart banking analyst, said that regulators needed to take a strong lead on the situation.
Angela Knight, of the BBA, told the BBC: "There is some evidence that savings are moving round, we have absolutely no problem with that.
"But what we are saying is that each and every government does have an ability to take certain actions themselves, but they must have a look at the broader competitive framework as well - the two are not inconsistent with each other."
The Treasury said on Thursday that it was in touch with its European counterparts.
Moving savings
One customer who has decided to move around his savings is retired accountant David Roots, from Somerset.
The 43-year-old had Ј102,000 saved with ING, Ј52,000 with Bradford & Bingley and Ј21,000 in an Isa with Alliance and Leicester.
He has decided to keep Ј35,000 with B&B and A&L owner Santander, another protected Ј35,000 with ING and the remaining Ј105,000 with the fully protected Anglo Irish Bank.
"I know it is selfish but I am concerned about what is happening," he said.
"If people move money around then it might destabilise the banking sector, but you have to act for yourself."
He called for the UK government to protect 100% of savings, and for more regulation to prevent banks lending beyond their means.
(BBC)
<< Back