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Last Updated: Thursday, 20 September 2007, 08:01 GMT 09:01 UK
Treasury outlines saver guarantee
Northern Rock branch
New accounts will not be covered
The Treasury has explained the limits of its guarantee to savers in the Northern Rock bank - three days after the Chancellor announced the plan.

The unlimited support for savers' deposits covers accounts that were in existence up to midnight on Wednesday 19 September.

It also covers accounts reopened in the future after being shut in the panic between 13 September and 19 September

But new accounts opened after 19 September will not be protected.

"This guarantee covers future interest payments, movements of funds between existing accounts, and new deposits into existing accounts," said a Treasury statement released to the stock market at 0700BST.

"Since it would otherwise be unfair to other banks and building societies, the arrangements would not cover any new accounts set up after 19 September," it added.

Added interest

The guarantee will stay in place until the Treasury judges that the crisis in the financial markets has abated.

The Northern Rock welcomed the Treasury's announcement.

"This further clarifies and improves the situation for Northern Rock savers," a spokesman said.

The Northern Rock has already pledged that any savers who withdrew money in the panic could put it back, without any form of penalty charge or transfer fee, by 5 October.

Any interest lost by those savers will also be credited to their re-opened accounts.

Run on bank

The offer of unlimited support to Northern Rock savers was made late on Monday afternoon by the Chancellor Alistair Darling.

However enquiries by the BBC revealed later that the authorities did not appear to have any plan in place to put this guarantee in action, should it be needed.

In the event, the Northern Rock savers are now unlikely to need to rely on the Chancellor's pledge as the run on the bank has ended.

The Northern Rock has, so far, not even needed to draw on the first emergency overdraft at the Bank of England announced last week.

The Treasury makes clear that its guarantee also covers unsecured borrowing and lending involving other banks.

But it does not does not cover bonds and securitised mortgages sold by the Northern Rock to other financial institutions.


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