Northern Rock customers told to 'calm down'

Posted: 17 Sep 2007 11:43:50 GMT

The British Bankers Association (BBA) has released a statement geared towards quelling fears among customers of Northern Rock that the bank is facing insolvency.

The British Bankers Association (BBA) has released a statement geared towards quelling fears among customers of Northern Rock that the bank is facing insolvency.

"The Northern Rock is a sound and safe bank and there is absolutely no reason for either mortgage customers or savers to worry," reads the statement.

Savers have so far withdrawn over £2 billion from their accounts as news of an emergency funding package from the Bank of England created widespread panic among many.

Thousands queued outside branches across the country on Friday and Saturday, and the bank's online service suffered repeated crashes due to excessive traffic.

In spite of the exodus, however, analysts insist the bank is solvent and can continue to operate solely on the emergency funding.

The liquidity problem stems from the fact that Northern Rock's ample assets are currently tied up in mortgage loans which have now become increasingly difficult to securitize, or resell, because of the turmoil in global credit markets.

"The British banking system is carefully regulated and overseen which ensures that all banks operate safely and prudently in the interest of their customers," according to the BBA statement.

"Everyone should calm down and refrain from making simplistic comments in a very complex area which just cause unnecessary worry and concern."

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