Northern Rock today withdrew some of its savings products for new customers in a bid to ensure it does not have an unfair advantage from state ownership. The rush of consumers looking for safer places for their savings placed Northern in danger of exceeding a 1.5% cap on its share of UK retail deposits.

The move is designed to ensure it does not abuse any competitive advantage. The nationalised bank is one of few financial institutions that has a 100% guarantee for the safety of customers' savings, as it is government-backed. The move is to push savers should reconsider transferring their savings to Northern Rock as its nationalisation may lead to a drop in its savings rates.

On Thursday, it said that it had seen a "sizeable inflow" of deposits in recent days owing to financial turbulence. It must cap its market share of UK retail deposit balances at 1.5%.

This commitment was made as part of the nationalisation deal. The move comes as the Irish government confirmed legislation to guarantee the safety of 100% of savings at six institutions.

The move follows the recent withdrawal of Northern's fixed rate access bond and its online e-saver product. Northern has also amended its product pricing in order to uphold its competitive commitments.

It said: “The self-imposed framework is designed to ensure Northern Rock does not take unfair advantage of Government support during the period of temporary public ownership. As part of this commitment Northern Rock has capped its market share of UK retail deposit balances at 1.5%.

“Northern Rock confirms that retail balances remain within this level.”
Savers have also been flocking to banks such as Lloyds TSB and Abbey, which is owned by Spanish giant Santander, as well as to the Treasury-backed National Savings & Investments.

The Irish Government’s pledge this week that it would guarantee all money saved with an Irish institution for two years is also thought to be causing a flow of money to Irish banks.

Further details on Northern Rock’s trading will emerge on October 14 when the company is due to release a third quarter update.

In general this is good for the Taxpayers since the Bank's rebound is likely to give good return to the billions spent on taking it on.