Panicking customers take £1.5bn from Northern Rock

Savers ignore call for calm and queue for hours to get their money out of crisis bank
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The Independent Online

Northern Rock faced being wiped off the high street within weeks last night, after customers rushed to pull their money out of the stricken mortgage bank.

Major bankers were believed to have hatched plans to sell the bank, dividing its £100bn mortgage portfolio between their institutions, in what would amount to a private-sector rescue mission. The remarkable plan came as City experts voiced fears that the bank could see as much as £12bn – more than half of its deposits – withdrawn this week.

Police were called in to help handle the rush of customers taking money out yesterday, as savers ignored pleas for calm and clamoured for a second day outside branches across the UK. From Glasgow to London, long lines formed even before counters opened, amid concerns over Northern Rock's stability after its emergency loan from the Bank of England.

The UK's fifth-largest lender was forced to go to the Bank for help with cashflow problems last week. But the rescue package provoked panic among some of its 1.5 million savers. The exodus of savings, after clients pulled out £1bn – or 4 to 5 per cent of retail deposits – on Friday, came in despite reassurance that customers' money was safe. No official figure was available yesterday but speculation suggested that as much as another £500m may have been withdrawn. The bank has also yet to learn about withdrawals from the £9.9bn held in postal accounts.

Many financial experts are suggesting that the Northern Rock brand name is doomed, predicting that it will disappear from the high street within a year.

David Cameron, the Tory leader, waded into the crisis last night, claiming the "huge expansion of public and private debt" overseen by Gordon Brown as Chancellor had paved the way for Northern Rock's plight.

In an attempt to maintain confidence in his company, Adam Applegarth, the chief executive, insisted the bank had yet to draw on the emergency cash, which he called "a backdrop in case we need to use it".

A spokesman said that branches had opened early and remained open late in order to deal with any queues. Staff were working hard to answer calls and keep the website responding, he said. "We are determined to help everyone as best we can," the spokesman added. "We continue to reiterate that their money is safe."

The British Bankers' Association urged customers to "calm down". "Northern Rock is a sound, safe bank and there is absolutely no reason for mortgage customers or savers to worry."

But the evidence across the country yesterday suggested the pleas for calm had failed to convince many savers.

Northern Rock has struggled since money markets seized up over the summer. The bank is not short of assets, but they are tied up in loans to home owners. The bank has found it difficult to borrow the cash to run its day-to-day operations because of the global credit squeeze.

Its shares fell by 32 per cent on Friday after it emerged it had approached the Bank for help. And it warned it could have £150m shaved off its profits due to the money-market turmoil.

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