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Police called to break-up Northern Rock panic queues as customers withdraw millions


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Police called to break-up Northern Rock panic queues as customers withdraw millions

 

By SEAN POULTER and PAUL SIMS - More by this author » Last updated at 15:35pm on 15th September 2007 commentIconSm.gif Comments (26)

Police officers have been called to break-up panicked crowds gathering to withdraw their savings from Northern Rock.

 

While the Government and the City said there was no need to panic, savers ignored the reassurances, withdrawing close to £1billion yesterday.

 

Staff at Glasgow city centre branch called police to deal with 'boisterous customers'. Two plain clothes officers arrived just before the bank's official Saturday closing time of midday.

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Queues150907_468x328.jpgPolice deal with queues outside Golders Green Northern Rock branch

 

banksexposed1409_468x329.jpg

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A spokesman for Strathclyde Police said: "A call came in asking for assistance as some of the customers were getting a bit boisterous. The manager was spoken to and police advised the store to close."

 

The dramatic scenes followed the admission by Northern Rock, Britain's fifthbiggest mortgage lender, that it was running out of ready money.

 

Its share price plunged by a third - amid falls across the FTSE 100 index - as the market digested the implications of the Bank of England acting as a "lender of last resort" for the first time in more than 30 years.

After the news broke, lengthy queues spilled on to the streets as Northern Rock's staff attempted to reassure worried customers they would not lose their life savings.

The bank also had to close down its website, which could not cope with the flood of savers trying to transfer their money.

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Queues150907_468x328.jpgPolice deal with queues outside Golders Green Northern Rock branch

 

 

The mortgage bank is the first major British victim of the 'crunch' triggered by the failure of thousands of risky mortgages in the U.S. It has found it impossible to borrow money from international banks, which are wary after losing billions as a result of the 'sub-prime' fiasco.

Chief executive Adam Applegarth said the crisis was the worst he had seen in 25 years. However, he added: "My advice to customers is, with the Bank of England providing this liquidity, they should be greatly reassured.

"If I was a depositor - and I am - I would be reassured if the Bank of England was behind me."

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RockNewcastlePA_468x641.jpgA queue forms outside the branch

 

RockLeedsRPY_468x352.jpgThis morning: Outside the Northern Rock branch in Leeds

 

RockCroydonAP_468x326.jpgSome clients were concerned about the financial future of Northern Rock but others were just seeking reassurance in Croydon, Surrey

 

 

Although Northern Rock has assets of £115 billion, it does not have the ready money needed to pay off some of its existing debts and to give out new mortgages.

As a result, it has been forced to ask the Bank of England for a financial lifeline to allow it to continue trading.

Bosses at the bank have predicted that mortgage rates will have to rise for millions of Britons.

This is a knock-on effect of the shortage of ready money - or liquidity - in the system.

Shares in Northern Rock slumped 31 per cent after City analysts shared their fears that its profits will be severely dented.

The company was forced to issue a profit warning, suggesting the bank will this year make around £150 million less than previously expected.

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RockKingstonPIN_468x361.jpgCustomers outside the Northern Rock branch in Kingston Upon Thames, south-west London

 

 

Panic took hold among customers despite reassurances from Gordon Brown, Alistair Darling, City watchdogs and the finance industry that Northern Rock remains solvent.

However, the company's future looks distinctly rocky and there is every chance it will now be taken over by a bigger rival.

It has instituted a series of cost-cutting measures and a recruitment freeze, putting a question mark against the future of its 6,000 staff.

One leading economist has condemned the decision to bail out Northern Rock.

Professor Willem Buiter of the London School of Economics said the move gave lenders the green light to borrow and lend aggressively in the knowledge the Bank of England would always come to the rescue.

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RockBromleyG_468x714.jpgConcerned customers in Bromley, Kent

 

He added: "The problem has been caused by a combination of Northern Rock's flawed business strategy and economic reality with what has happened in America.

"And I do not see why the Bank of England should have come to their aid because Northern Rock is a fairly small fish anyway.

"It would have been better to leave it to the private sector to sort out. The bank is not too large to fail."

Northern Rock has some 1.5million customers with £24 billion invested in savings accounts. However, its 800,000 mortgage borrowers have outstanding debts of £100 billion.

The Chancellor stressed that the Bank of England's support system was put in place in 1997 to cover exactly the sort of problems being experienced by Northern Rock.

He said: "The key thing is to make sure that, on top of a very strong and stable economy here and throughout the world, banks do have money.

 

DarlingG080207_228x273.jpgAlistair Darling: 'It is in everybody's interest that we have a very stable banking system'

 

 

"There is not a shortage of money in the system but while some of the banks sort out the consequences of the collapse in the U.S. they are reluctant to lend to each other."

The Prime Minister's spokesman added: "We have a very well-established system for dealing with financial stability and issues of that kind.

"This is not an issue about the solvency of Northern Rock."

There are fears that other major banks will also need to ask the Bank of England for help in the near future.

But Angela Knight, the chief executive of the British Bankers' Association, said the public can be "absolutely confident" that Northern Rock is a "very sound financial institution".

Her calming words failed to reflect the scenes around the country as customers clamoured to take out their savings from local branches.

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Alistair Darling's a prick. Controversy follows him wherever he goes. Mancunians will remember the £600m promised for Metrolink extensions which mysteriously disappeared when London got the 2012 Olympics. :rolleyes:

 

Did he study at Hogwarts, by any chance??:rolleyes:

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Don't Panic Mr Mainwaring!

 

What's worrying is that on Mark's little table, only HSBC has more money than it have lent out.

 

from what i understood on newsnight yesterday, that shouldn't be a problem for most of the bigger banks. the problem with northern rock was the majority of its business was mortgages and not bank accounts.

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from what i understood on newsnight yesterday, that shouldn't be a problem for most of the bigger banks. the problem with northern rock was the majority of its business was mortgages and not bank accounts.

 

So the moral to this tale is: "Don't bank on banks!!":rolleyes:

 

The way Northern Rock is going, it'll end up having to be downgraded to Northern Pebble before long.......................

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