Northern Rock investors rush to get cash from crisis-hit bank

They faced queues of up to four hours as they tried to withdraw their money from the crisis-hit bank.

Savers, who were almost all pensioners, flocked to the York branch, saying they feared for their investments following the news that Northern Rock had called on emergency funding from the Bank of England to help it through the credit market crisis.

The York branch, at the top of New Street, remained open until 7pm to deal with all its worried customers.

By 11am yesterday a queue of 100 people had already formed outside, and it had almost doubled in size by the afternoon.

By 2pm dozens of people had been in the queue for at least three-and-a-half hours before they even reached as far as the door of the branch.

The majority of customers in the queue were pensioners and nearly all had gone to the building society to withdraw their money.

Some left the bank with wads of cash, while others had their savings transferred to another account.

Opportunist staff from the nearby Post Office came out and handed leaflets about their savings accounts to worried Northern Rock customers in a bid to create business.

Most people said they planned to take their savings to another bank or building society, but one woman even said she now intended to invest her money in property in Italy.

She said: "It's safer, and property is much cheaper abroad."

Some people said their entire life-savings were in their Northern Rock accounts while others admitted they had tens of thousands of pounds in the building society.

When asked if he was willing to appear in The Press one York pensioner replied: "No - because I don't want the cheque to bounce!"

He said: "I have a substantial amount in a savings account. I'm here to draw my money out. I want to make sure my money is safe, that's all."

Despite the queue, only three of the four cashier desks inside the building were open.

A member of staff walked along the queue to inform people that if they wanted to close down bonds they would have to do so at head office.

One customer, who had managed to draw out his savings after a three-hour wait, said: "I feel a bit embarrassed panicking like this, but these are all the savings I have and you can't be too careful."

Northern Rock has agreed emergency funding with the Bank of England to help it through a short-term liquidity problem, but it has stressed that while the funding has been agreed it has not yet needed to use it.

The bank has struggled to raise money to finance its lending ever since money markets seized up over the summer.

It has also warned that its 2007 profits will be more than £100 million lower than expected this year, at between £500 million and £540 million - well below the £647 million expected by the market.

Newcastle-based Northern Rock's chief executive Adam Applegarth urged people not to panic and stressed that the bank's support "reflected a recognition that Northern Rock is solvent".

A message on the company's website to customers trying to move money from their accounts online read: "You may find logon times for your online account are longer than usual. We apologise for this, but please be patient, we can assure you that we will be able to deal with your transaction."

A Northern Rock spokesman said: "Savings customers' deposits are safe. Our relationships with our customers are of paramount importance to us and there will be no changes to their accounts or the service we will provide.

"There will be no impact on our borrowers.

"Operationally, the company remains in good shape and the fundamental strengths of the business and brand remain unchanged."

* Northern Rock is open today until noon, but it may stay open later subject to demand.

Don't panic message

A YORK independent financial adviser says Northern Rock customers shouldn't panic.

Peter Ellam, of Ellam Financial, in Boroughbridge, said Northern Rock's situation was "unprecedented territory", but consumers had nothing to worry about.

He said: "I would advise people not to panic.

"There is no question of Northern Rock going bust.

"Even if they were to be in deeper trouble, they would be taken over by another organisation because there is absolutely no way the Treasury would let them go bust."

Ray Boulger, of independent mortgage experts John Charcol, agreed.

He said: "I certainly don't think there is any need for consumers to panic.

"The Bank of England has made it absolutely clear they will provide whatever funding Northern Rock needs to continue in business."

He said Northern Rock would be expecting some savers to withdraw their money, but this expectation would be reflected in the funding agreed with the Bank of England.

He said: "Northern Rock clearly has a liquidity problem in the short term but the Bank of England has made clear they are prepared to help banks that have a sound business. The Bank of England has given a vote of confidence."

Your questions answered

Q: I have savings with Northern Rock, should I move them?

A: No, financial advisers are urging savers not to panic. Northern Rock has a short-term liquidity problem, but the Bank of England would not have given it the funding if it was not solvent. The funding from the Bank of England is a vote of confidence that the underlying business is sound.

Q: What will happen if large numbers of people withdraw their savings?

A: Northern Rock will be expecting some savers to withdraw their money, and this expectation will be reflected in the funding agreed with the Bank of England.

Q: I have applied for a mortgage with Northern Rock, will I be affected?

A: No, Northern Rock has said that borrowers will not be affected by the current situation.

Q: What would happen to savings customers if a major bank did go bankrupt?

A: Anybody who loses money as a result of a firm which is regulated by the Financial Services Authority going bankrupt is entitled to compensation through the Financial Services Compensation Scheme. This pays savers the first £2,000 of any money they have lost in full, as well as 90% of the next £33,000.

Q: Are any other banks going to have to apply for emergency funding?

A: Obviously this will depend upon how long the current crisis continues, but Northern Rock is funded in a very different way to most banks as it is far more reliant on getting cash through wholesale credit markets.