London - The sense of panic over embattled Northern Rock bank eased yesterday as fewer savers queued to withdraw cash and the share price rebounded following a government pledge.
Some customers were queuing up for a fourth day to take their cash out of the British lender, which was forced to agree to an emergency rescue deal with the Bank of England on Friday.
But the battered company's share price recovered by about 10 percent yesterday morning after finance minister Alistair Darling announced on Monday that the Bank of England would guarantee all existing deposits in Northern Rock.
"Darling's statement appears to have introduced a degree of confidence into the system," said Philip Shaw, a macroeconomist at Investec Securities in London.
The central bank also acted to help ease turmoil surrounding Northern Rock by pumping another £4.4 billion (R63 billion) into money markets.
In a bid to soothe customers, Northern Rock, which had run into difficulties borrowing money in the midst of a worldwide credit squeeze, took out a full-page advert in several national newspapers.
Chief executive Adam Applegarth said the firm was open for "business as usual" and insisted in the ad: "We will not let you down."
Such reassurances seemed to have had an impact, with queues dwindling outside Northern Rock branches.
No queues formed outside the Moorgate branch in central London or at branches in Exeter, Bournemouth and Leeds, among other cities.
"I don't think people should be worried now," said Gus Thomson, standing outside a branch in Glasgow. "Not after this morning and hearing the news everything is guaranteed. I don't think there's any reason to panic."
In Liverpool the queue was down to 40 people, while in Bristol staff described the situation as "very quiet", with only three customers in the first hour after opening.
Savers were still withdrawing their money in some branches, though. About 50 people were queuing outside the Kingston-upon-Thames branch in southwest London, while about 75 queued outside the Golders Green branch in north London, the BBC said.
Queuing outside the Kingston branch, pensioner Doria Watson said: "I don't know what we will do with the money yet, but I don't trust what the government says."
Many commentators are closely watching Northern Rock's peers, such as Alliance & Leicester, for any sign that they could be similarly hit.
While Alliance & Leicester lost more than 30 percent of its share value late on Monday, it won back about 27 percent of its stock value yesterday morning.
Meanwhile, the Financial Times warned that Darling's announcement could end up being bad news for the economy. "The bailout may give British taxpayers the worst of both worlds: implicitly putting them on the hook for the entire banking system, while not necessarily reassuring customers enough to prevent the bank run," its editorial read.
Without citing its sources, the paper said that UK officials had already begun reviewing the overall system of guaranteeing savings.
Under normal regulations, only up to £33 000 of deposits are protected. Darling's announcement covers all savings, whatever the amount.
About £3 billion was reportedly withdrawn by Northern Rock's savers between Friday and Monday evening. - AFP