How dare the British public seek to deposit funds with Northern Rock! The safety of a nationalised bank appeals to a huge number of people and, 1 year after the run on the bank, we’ve had queues of people trying to put money back in. The Moorgate branch in London was only seeing new customers by appointment even though they only had two products left to sell – their cash ISA and a branch saver (you have to go into a branch to do anything with your account!). Customers who had made appointments the day before returned today to find that the well-priced bond they wanted had been withdrawn overnight.
So, why should we not seek the safety of Northern Rock? Because the government guarantee gives it an advantage over other banks, making them more likely to lose savers’ deposits and therefore more likely to require a bail out themselves? To be fair, they are committed to this course of action. Under European competition laws, Northern Rock can not hold more than £17.6 billion in customer deposits – equivalent to 1.5 per cent of all savings held in British institutions.
Interestingly, National Savings, whose rates on most things are extremely poor anyway, cut it’s rates recently. Making the safe havens less attractive? Why do I get the feeling we’re being herded like little savings cattle?