Northern Rock savers to lose savings guarantee

Northern Rock savers will lose their 100% guarantee in May as the UK government readies the company for a return to the private sector. This 100% guarantee on savings with the company was introduced at the height of the financial crisis when savers were literally queuing for miles to withdraw their money from Northern Rock branches.

In reality Northern Rock is now a far stronger company than it was at the height of the financial crisis with the "bad bank" now stripped away leaving the better quality investments with the "good bank". While the government has yet to confirm exactly what will happen to the "good bank" when it is reintroduced into the private sector, it is likely it will be acquired by either an overseas bank or a UK operator such as Virgin Money.

In many ways Northern Rock epitomises the rise and fall of the UK financial sector over the last 20 years, having risen from relative obscurity to the top of the mortgage chain with a business model which left the company over exposed to the money markets. While in traditional economic boom and bust scenarios the company would have been fairly secure, the credit crunch and the extreme drop in economic activity effectively ruined the business and the business model.