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Customers of British mortgage lender panic, despite government’s assurances

Thousands of customers queued up outside branches of a British mortgage bank for a second day Saturday to withdraw their savings, despite the government’s assurances of the bank’s solvency.

Northern Rock, the biggest British casualty so far of the credit crisis in the United States, urged its customers to stay calm after the bank revealed it had received the much-needed money from the central bank’s emergency fund. Earlier in the week, Northern Rock, Britain’s fifth-largest mortgage lender, turned to the Bank of England as the “lender of last resort” due to difficulties in raising cash from commercial markets.

Alistair Darling, the Chancellor of the Exchequer, said on Channel 4 TV Saturday night that the authority “has reiterated yet again tonight that it is satisfied that Northern Rock is solvent, can carry on doing business and, crucially, paying out money if people want to withdraw their funds.” However, customers of Northern Rock, who seem to ignore the message, are still lining up outside some of the bank’s 76 branches around the country, forcing the bank to extend opening hours.

The Financial Times said customers had withdrawn £1 billion ($2 billion) from Northern Rock on Friday. The bank, however, did not confirm the figure, which represents 4% of its deposit base. Northern Rock’s share price had plummeted by over 20% and the mortgage lender said its forecast profits for 2007 could drop by as much as £150 million ($301.8 million). (people.com.cn)