Fool News: Treasury Extends Northern Rock Guarantee

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09 October 2007 | 0 Comments

The Northern Rock share price shot up by over 20% today, following the extension of a government guarantee.

The Northern Rock share price shot up by over 20% today, following the extension of a government guarantee.The Treasury - on behalf of the Tripartite Authorities (namely the Bank, the Treasury and the Financial Services Authority) - has promised to refund all customer savings should the mortgage bank go under. This includes those not yet invested, and builds on the guarantee announced two weeks ago, which only covered deposits made by September 19th.The share price rose by around 35p following the announcement, and at midday today stood at 207.5p.According to Northern Rock, the new assurance will remain in place "during the current instability in the financial markets", and will ensure that all retail savings "remain guaranteed, safe and secure". It is hoped the move will encourage investors to return and relieve pressure on the banker, 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. Countering claims that the latest extension provides Northern Rock with an unfair commercial advantage, the bank also emphasised that it will pay an "appropriate fee" for the extension of the guarantee.Last month, Northern Rock fell victim to a frenzied run on the bank which saw it lose around £2 billion in customer withdrawals. To date, it has borrowed almost £11 billion in emergency funding from the Bank of England to help combat the crisis.

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