Treasury Agrees To Extend Northern Rock Guarantee

Wed, 10 Oct 2007

Northern Rock’s share price increased by more than 20 per cent yesterday, following the extension of a government guarantee.

The Treasury, on behalf of the Tripartite Authorities, has promised to refund all customer savings, including those not yet invested, should the mortgage bank be forced into adminsitration .

The extension of the guarantee, originally announced two weeks ago, will remain in place "during the current instability in the financial markets", and will ensure that all retail savings "remain guaranteed, safe and secure", according to Northern Rock .

The share price rose by around 35p following the announcement, and stood at 207.5p yesterday.

It is hoped the move will encourage investors to return and relieve pressure on the lender, which has said it aims to "pursue the full range of its strategic options" with regard to either remaining independent, or taking advantage of a rescue package in the form of a potential buy-out.

Northern Rock was also keen to counter claims that the latest extension provided the bank with an unfair commercial advantage, emphasising that an "appropriate fee" will be paid for the extension of the guarantee.
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