Posted on 09/14/2007 3:35:01 PM PDT by blam
Northern Rock customers withdraw £1bn
By Harry Wallop, Consumer Affairs Correspondent
Last Updated: 10:13pm BST 14/09/2007
About £1 billion was withdrawn by panicking Northern Rock customers on Friday, as fears for the bank's future sent shock waves through the City and caused its shares to crash.
The company's phone lines were jammed for most of the day, its website crashed and the 72 branches were besieged by thousands of worried customers after it admitted having to ask the Bank of England for emergency funding.
The scenes came as the financial turmoil that has engulfed the money markets in the past month spilled on to the High Street.
The Daily Telegraph understands from sources close to Northern Rock that the panic generated by news of the emergency funding led to customers withdrawing about £1 billion from their accounts. However, it is believed the bank privately feared that this total could have been higher.
On a day of widespread concern over the economy:
• Northern Rock's shares fell by 31 per cent, leading to the bank - the fifth largest lender - being put up for sale.
• Other major lenders, including Bradford & Bingley, Alliance & Leicester and Paragon, issued statements insisting they were not in similar trouble.
• The Chancellor appealed for calm and insisted that both the banking system and the economy were stable.
The Bank's decision to help Northern Rock - by guaranteeing funds of up to £31.5 billion - is the first time since 1973 that it has bailed out a High Street lender.
Northern Rock tried to reassure its 1.4 million savers, 800,000 mortgage holders, as well as its thousands of shareholders, that it was not in serious danger.
Adam Applegarth, the chief executive, said: "In these extreme times we are pleased to have a high-quality asset base and remain confident in the excellence of our strong customer franchise, our efficient business platform and our well-known brand."
However, his words failed to reassure thousands who queued outside the bank's branches from early morning.
The bank has deposits exceeding £20 billion, so with about 1.4 million savers, yesterday's withdrawals amounted to an average of about £700. Some branches stayed open late to deal with the crowds and there were reports of fights in one queue and even a confrontation with staff where police had to intervene.
In Cheltenham, Christopher Howard, 64, a former hotelier, and his wife Fiona, 48, refused to leave the bank until staff transferred their £1 million savings, held in an online Northern Rock account.
A spokesman for the mortgage lender, which had £24 billion of savers' deposits at the start of the week, said it had anticipated the customer reaction when it approached the Bank of England.
"It is understandable that customers are concerned but the Bank of England, the Treasury and the Financial Services Authority have all confirmed Northern Rock is solvent," he said.
Ten tips to help you safeguard your savings Couple's office siege over £1m savings The company said it had yet to use any of the Bank of England's facility but analysts said it was only a matter of time.
Northern Rock is still writing new mortgages "albeit at a lower level than usual", the spokesman said.
Savers' money was safe, financial experts said. But Martin Lewis, of the website MoneySavingExpert.com, said this did not mean people should necessarily keep their money with the bank.
"Almost all of Northern Rock's savings rates can easily be beaten by the best buys on the market anyway. So this is a good occasion to check their rates and ditch and switch to earn more elsewhere."
Rival lenders rushed to take advantage of the chaos in the mortgage market, with both Abbey and First Direct offering eye-catching fixed rate deals.
However, others including Bradford & Bingley and Alliance & Leicester felt compelled to issue statements saying they were unaffected by the chaos.
Paragon, a buy-to-let specialist, saw its shares fall 17 per cent but quashed City rumours that it was next in line, saying it had "adequate" funding until 2008.
Opposition MPs said the crisis was the culimination of 10 years’ mismanagement by the Gordon Brown-run Treasury and "reckless lending" by banks.
Angela Knight, the chief executive of the British Bankers’ Association, hit back: "Everyone should calm down and refrain from making simplistic comments in a very complex area which cause unnecessary concern. The British banking system is carefully regulated and overseen which ensures that all banks operate safely and prudently in the interest of their customers."
Alistair Darling, the Chancellor, said the fact that the Bank stepped in was proof that the system was working efficiently.
Northern Rock’s shares fell 201p to close at 438p, as the company said its profits would be almost £150 million lower than expected this year.
Its troubles caused a sell-off of banking and property company shares and the FTSE 100 index of leading shares closed at 6,289 — a fall of 74 points or 1·17 per cent.
Northern Rock Customers Queue As Cash Crisis Hits High Street
"Shares in one of the UK's largest mortgage lenders, Northern Rock, have fallen 32% after it had to ask the Bank of England for emergency funding. "
Britishj billion (A million million)?
Or a U.S. billion (a thousand million)?
Okay, it's only some trouble but not serious. I'm sure that'll calm 'em down. /sarc
How long will it take the fed to hear about this?
Baghdad Bob: There is no need to panic. We have as much money as you could possibly want! Right here in the vault (behind door number 3).
Paging George Bailey...
Well, duh. The pound is over two US dollars. ...can’t administer production in the rest of the world from such a small country by that much and live off of it forever.
In a related story that appeared yesterday British real estate prices seem to be in a slight year over year decline ,, about 2% ... they had a BUNCH of speculation in the late 90’s early 2000’s in housing , seems like all the immigrants put them in a situation where demand exceeded supply for about 10 years...
"LONDON (AFP) — Anxious customers of British bank Northern Rock rushed to withdraw their savings Friday, forming lengthy queues in front of branches after the lender was bailed out by the Bank of England.
Shares in Northern Rock, which issued a profits warning on Friday, plunged 31.46 percent to 438 pence at the close, dragging the European banking sector lower as investors fretted over potential difficulties elsewhere.
The Bank of England on Friday came to the rescue of Britain's fifth-biggest home loan provider, which said it was facing severe difficulties raising cash to cover its liabilities amid the ongoing global credit squeeze.
From London to Edinburgh, panicking customers were pictured on British television channels crowding outside Northern Rock branches to withdraw their savings.
"I have withdrawn all my money," said one worried customer who wished to remain anonymous outside a branch in Harrow, north-west London.
"I know everyone has been urged not to panic but I just felt safer moving the money somewhere else rather than worrying about Northern Rock's financial position over the next few days," she added.
Analysts forecast that the troubled bank was very unlikely to go bust despite the sight of queues in the street raising the spectre of a "bank run."
A bank run is when customers withdraw savings en masse due to fear that a lender will become insolvent, which can force the bank into bankruptcy..."
bank run ping
http://afp.google.com/article/ALeqM5jE8TCRmQ2ht3SiYxsszzLL0J2Vjw
My story is almost identical to the Howard’s, although it didn’t involve the police.
I went to Northern Rock on Friday to withdraw £435,000 life savings to move into another bank because I couldn’t access their website to carry out the money transfer.
I was told by counter staff and a branch manager that all withdrawals over £5000 have been suspended due to ‘cash flow problems’(!). Since media reports have said the Bank of England are writing ‘blank cheques’ how can they have cash flow problems?
Very worried, I travelled to London to visit another large branch but by 4pm on Friday was told exactly the same story by London Northen Rock bank staff - that they were unable to release the money because they had orders to block large payments. After complaining for an hour, I told them I was going to start phoning newspapers to publicise the fact that they were blocking large withdrawals.
Suddenly at this point, they totally changed their story and told me that ‘the withdrawal could be made under exceptional circumstances, but would take at least a week to authorise’. This is on an ‘instant access account’! My money was supposed to be available without notice as I am using it to by a second property!
I was also told by an ‘acting branch manager’ that if I talked to the newspapers, I would be ‘sued’ by Northern Rock. I was not told what I would be ‘sued’ for.
So now I’m in limbo. On the phone, Northern Rock are telling me I can have immediate access to my money - ‘just go into a branch, it’s fine’. But when I turn up, I’m told I can’t get my money, or it will take a minimum of one week. And when I talk about newspapers I’m legally threatened.
Very, very worrying.
Indeed. I hope you can get your money out. Is there any fraction that is insured by the UK (like FDIC depositer's insurance in the US)?
“Feed the Birds”
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