| Since the Financial Services Compensation Scheme | | | | in charge of all new lending, with £10bn of existing |
| (FSCS) announced it would cover all banks and | | | | mortgages. This is expected to be sold off in the |
| building societies regulated by the Financial Services | | | | near future. |
| Authority (FSA) for up to £50,000 per banking | | | | The second half, called Northern Rock (Asset |
| institution, most savers had their banking confidence | | | | Management) plc holds most of the banks mortgages |
| heightened. | | | | - around £50bn - and will be repaying outstanding |
| But Northern Rock took this one step further by | | | | government loans. |
| offering it's customers a 100% savings guarantee on | | | | The split prompted the Treasury's review of the |
| all deposits, an advantage it was able to benefit from | | | | guarantee, and several reports earlier in the week |
| as a result of being backed by the government. | | | | indicated an imminent end to the status. |
| However, this 100% guarantee remains "under | | | | The final decision as to whether the limit will be |
| review" amid reports of a decision to shift the status. | | | | changed rests with the chancellor Alistair Darling, and |
| Northern Rock will have to provide its customers | | | | the Treasury has said that the issue remained under |
| with at least three months notice of any changes it | | | | review. |
| makes to the compensation limit. The bank insisted | | | | One sector that would welcome the guarantee |
| on Wednesday that the review was "ongoing". | | | | change with open arms are building societies, many |
| Throughout the downturn the government has | | | | of which experienced a damaging blow after a |
| continued to have an implicit view that personal | | | | desertion by some savers. |
| savings accounts are safe, and even went as far as | | | | Recent figures show that total balances at UK |
| reassuring those that held accounts with the failed | | | | building societies fell by £1bn last year, compared |
| online Icelandic savings bank Icesave, that on this | | | | with a £19bn increase the previous year. |
| occasion it would cover 100% of deposits made by | | | | Part of the reason for this was as a result of |
| individual savers. | | | | slumping interest rates, but the Building Societies |
| During the financial crisis, when the future of many | | | | Association (BSA) also claimed that societies were in |
| banks remained uncertain, there was a shift to | | | | a different level of competition, with banks offering |
| safety by savers who were eager to ensure they | | | | the 100% guarantees distorting the savings market. |
| would not become the next victim to the recession. | | | | "The removal [of the Rock's 100% guarantee] in the |
| A spokeswoman for Northern Rock explained that | | | | very near future would be welcome," said a |
| this was "never intended to be permanent". | | | | spokeswoman for the BSA. |
| At the beginning of the year, the bank split into two. | | | | "We feel the building societies sector is fast |
| One half was named Northern Rock plc, holds all | | | | becoming the only one not directly subsidised by the |
| savings accounts amounting to around £19bn and is | | | | state. |