LONDON, May 24 (UPI) -- The British government is backing away from unlimited guarantees on Northern Rock deposits because the bank has shown signs of stability, a bank spokesman said.
The government added the guarantees in 2007, when Northern Rock depositors fled the bank during a run in which customers withdrew $20 billion, fearing a bank failure, The Times of London Online reported Monday.
"The removal of the guarantee is another positive step for Northern Rock and reflects our strong capital and funding position. We are returning to a level playing field," the bank spokesman told The Times.
The government is maintaining guarantees for adjustable-rate accounts up to $72,000, putting Northern Rock in line with other banks. Fixed-rate accounts will have unlimited guarantees until the terms of their deposits expire, The Times said.
The bank is now moving to lure customers the old-fashioned way, by raising interest rates. The rate is now 5 percent on new savings accounts.
"Northern Rock appears to be trying to attract new business to maintain its savings book because it is worried that customers might switch to more competitive deals when the guarantee is lifted," said Michelle Slade of Moneyfacts.
