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Thousands of panicking savers queued to withdraw millions of pounds from the UK's 8th largest bank

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From The Times
September 15, 2007

Run on the bank

Patrick Hosking, Christine Seib, Marcus Leroux and Grainne Gilmore

The jitters plaguing financial markets spread to the high street for the first time yesterday as thousands of panicking savers queued to withdraw millions of pounds from Northern Rock, Britain’s eighth-biggest bank.

The rush to pull out savings followed the revelation that Northern Rock had been forced to ask the Bank of England for a rescue injection of finance.

As crowds of customers demanded their money back, shares in Northern Rock slumped by 31 per cent after it alerted shareholders to its difficulties, wiping £900 million from its value. Shares in other financial institutions were also hit, with Alliance & Leicester down 7 per cent and the specialist lender Paragon Group down 17 per cent.

The Bank of England pledged to provide unspecified liquidity support to see Northern Rock through the turbulence while it worked on an orderly resolution to its problems. The bank is braced for a fresh surge of withdrawals from its 76 branches to-day and last night was planning to extend its opening hours.
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Adam Applegarth, the chief executive, told The Times that he had ordered extra deliveries of cash in expectation of the deluge.

The nerves were exacerbated yesterday when Northern Rock’s computer system collapsed under the weight of online customers scrambling to transfer money out of the bank. Savers were blocked from seeing details of their accounts, including statements, when they tried to log in. A spokesman said accusations that the bank had shut down its system to prevent a drain on its finances were ridiculous.

Ministers, regulators and bankers tried to calm the panic by issuing reassuring statements that customers’ deposits were safe. The Financial Services Authority, which supervises banks, said that Northern Rock was solvent, exceeded its regulatory capital requirement and had a good-quality loan book.

Alistair Darling, the Chancellor, who authorised the rescue, said: “At the moment there is plenty of money in the system, the banks have got money . . . they are simply not lending in the short-term way that institutions like Northern Rock need.â€