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Fears over Rock's online accounts Fears over Rock's online accounts
(20 minutes later)
Customers of the troubled Northern Rock bank have complained of problems accessing their online savings accounts because of massive demand.Customers of the troubled Northern Rock bank have complained of problems accessing their online savings accounts because of massive demand.
Savers have rushed to take money out of Northern Rock, amid concerns over its emergency Bank of England loan.Savers have rushed to take money out of Northern Rock, amid concerns over its emergency Bank of England loan.
Its branches saw long queues of worried customers on Friday and Saturday.Its branches saw long queues of worried customers on Friday and Saturday.
Northern Rock insists that the online problems are "entirely logistical" and "in no way related to the bank's solvency".Northern Rock insists that the online problems are "entirely logistical" and "in no way related to the bank's solvency".
According to online customers the only way they can get to their money is via the internet, due to the terms of their accounts. But demand is so high many are cannot access the site.According to online customers the only way they can get to their money is via the internet, due to the terms of their accounts. But demand is so high many are cannot access the site.
name="story"> class="bodl" href="#shares">See what went wrong at Northern Rock Northern Rock is a sound and safe bank and there is absolutely no reason for either mortgage customers or savers to worry British Bankers' Association class="" href="http://www.bbc.co.uk/blogs/thereporters/robertpeston/2007/09/rock_the_numbers.html">Robert Peston's blog class="" href="/1/hi/business/6994434.stm">Treasury statement in full class="" href="/1/hi/business/6994230.stm">Reaction to the news class="" href="/1/hi/business/6994742.stm"> Lender Paragon's shares hit
"For us online savers they appear to have taken no account of the problems with their website," Paul Hancock from west Sussex told BBC Radio Five Live."For us online savers they appear to have taken no account of the problems with their website," Paul Hancock from west Sussex told BBC Radio Five Live.
"Their chief executive has said all the time that it's business as normal but with their website being down it's been far from normal for us online savers.""Their chief executive has said all the time that it's business as normal but with their website being down it's been far from normal for us online 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. Because of the global credit crunch it has found it difficult to borrow the cash to run its day-to-day operations.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. Because of the global credit crunch it has found it difficult to borrow the cash to run its day-to-day operations.
If a mortgage lender goes bust, no-one will come round trying to repossess borrowers' homes to get the money back What if a bank goes bust?
Despite reassurances over the safety of their savings, customers have taken out well over £1bn in the last few days. Northern Rock has not confirmed how much money has been withdrawn from branch savings accounts.Despite reassurances over the safety of their savings, customers have taken out well over £1bn in the last few days. Northern Rock has not confirmed how much money has been withdrawn from branch savings accounts.
Chancellor Alistair Darling and City watchdog the Financial Services Authority (FSA) have tried to reassure customers that at the bank was still functioning.Chancellor Alistair Darling and City watchdog the Financial Services Authority (FSA) have tried to reassure customers that at the bank was still functioning.
"To be absolutely clear, if we believed that Northern Rock was not solvent, we would not have allowed it to remain open for business," FSA chairman Callum McCarthy said."To be absolutely clear, if we believed that Northern Rock was not solvent, we would not have allowed it to remain open for business," FSA chairman Callum McCarthy said.
Emergency loan untouched
The chancellor also sought to reassure the public, telling the BBC he authorised the Bank of England loan "because I believe it's important that people should have confidence in the stability of the banking system."The chancellor also sought to reassure the public, telling the BBC he authorised the Bank of England loan "because I believe it's important that people should have confidence in the stability of the banking system."
This has not stopped thousands of savers emptying their accounts, with long queues at branches. On Saturday, queues outside branches in Sheffield and Golders Green in north London grew so large that police officers were deployed for crowd control
The bank says difficulties with the bank's website "are in no way related to the bank's solvency or its underlying ability to deliver funds to savers who wish to withdraw".The bank says difficulties with the bank's website "are in no way related to the bank's solvency or its underlying ability to deliver funds to savers who wish to withdraw".
Northern Rock is a sound and safe bank and there is absolutely no reason for either mortgage customers or savers to worry British Bankers' Association Robert Peston's blog Treasury statement in full Reaction to the news Lender Paragon's shares hit
Northern Rock spokesman Brian Giles said the website was running slowly owing to a high number of customers, and insisted: "There is no gate blocking anyone from accessing their account."Northern Rock spokesman Brian Giles said the website was running slowly owing to a high number of customers, and insisted: "There is no gate blocking anyone from accessing their account."
Northern Rock chief executive Adam Applegarth earlier highlighted that it had yet to draw on the Bank of England's emergency loan, which he called "a backstop in case we need to use it".
Mr Applegarth was the architect of the bank's rapid expansion over the past few years, and earned £1.35m in salary and bonuses last year.
It is unclear how much money the Bank of England has offered to lend to Northern Rock.
Any loan has to be backed by the bank's assets, and according to calculations by BBC business editor Robert Peston, Northern Rock can probably draw on about £30bn - which should just about cover all the savings that customers have deposited with the bank - in the "very unlikely case that every single one of its depositors wanted its money back".
NORTHERN ROCK FACTS Founded in 1965 after merger of Northern Counties Permanent Building Society and Rock Building SocietyHeadquarters in NewcastleBecame a public company in 1997Has 6,400 staffHas 18.9% share of new UK lendingLoans and assets of £113bnDeposits from customers of £24bn Northern Rock's share price Q&A: Northern Rock crisis The chairman of the Treasury Select Committee, John McFall, said Northern Rock's customers should not panic.
"The banking system in the United Kingdom is strong," he said.
"We've had 60 quarters of continued growth, the world economy has grown for the past five years. So it's against a strong background.
"Don't let's predicate everything of doom and gloom on one small bank at that particular time. And I think it would serve us all well to stand back a little bit on this issue and give it time."
HAVE YOUR SAY This is a temporary liquidity problem, nothing else Geoffrey Pearce, London, United Kingdom Send us your reaction He said: "People can use their accounts in the usual way, they can carry on making their mortgage payments in the usual way. Northern Rock will be able to carry on its business."
The British Bankers' Association said: "Northern Rock is a sound and safe bank and there is absolutely no reason for either mortgage customers or savers to worry."
Michael Fallon, a Conservative member of the Treasury Select Committee, said questions needed to be asked about the deal.
He said: "We're going to be asking the governor of the Bank of England when he appears before the Treasury Select Committee next week, exactly why taxpayers' funds should be used to bail out a building society that appears to have been borrowing rather differently to lots of other building societies and banks."
Slow-down predicted
Shares in Northern Rock fell by 32% on Friday after it emerged it had approached the Bank of England for help.
The bank warned it could have £150m shaved off its profits due to the money market turmoil.
Unlike most banks, which get their money from customers making deposits into savings accounts, Northern Rock is built around its mortgage business.
It raises most of the money which it provides for mortgages by borrowing from banks and other financial institutions.
Its costs have soared as banks have stopped lending to each other because of fears over potential losses on high-risk US mortgages, creating a credit crunch as liquidity dries up.
Experts predicted a slow-down in the UK housing market as result of the financial troubles.
The former head of the Financial Services Authority, Sir Howard Davies, said that mortgages were likely to become more difficult to obtain and costlier.
"I would expect the net of all this to be a depressing effect on the housing market and for house prices at least to stabilise and probably to fall somewhat," he said.
Oxford University's Professor John Muellbauer predicted falls in house prices in London and the South East.
"There is going to be a fallout in the City. The UK is very dependent on the City of London - bonuses and jobs will be cut in the coming year and that's bound to affect prices in London, that tends to spill over into the South East."
WHAT'S HAPPENING AT NORTHERN ROCK? Mortgage lending Northern Rock lends a large amount for mortgages, and finances this with money from banks and savers Savings Northern Rock receives a relatively small amount of money from saversMoney markets Have stopped lending money to Northern Rock due to the crisis in the US sub-prime mortgage marketBank of England Steps into the breach to give Northern Rock an emergency loan Images: PA, Getty
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