This man knew the pathetic rates banks were offering wouldn't do him any good. Savings accounts in banks are really like the Hyundai Matrix, that has an unquenchable thirst. They erode capital and make banks richer. If everybody went the bank and withdrew all their monies at one time, banks would collapse at an instant.
Northern Rock is a classic example of this. It reached to the point of collapse in 2007 due to the sub-prime crisis which caused people to withdraw their monies in a frenzy. It was estimated that £1 billion was withdrawn by customers in one single day, about 5% of the total bank deposits held by the Northern Rock.In one incident, police were called to the branch in Cheltenham, Gloucestershire when two joint account holders barricaded the bank manager in her office after she refused to let them withdraw £1 million from their account. Their money was held in an internet only account, which they were unable to obtain after the Northern Rock website became inaccessible due to the volume of customers trying to log on.
On 17 September, as worried savers continued to flock to some Northern Rock bank branches to withdraw their savings, it was reported that an estimated £2 billion had been withdrawn since the bank applied to the Bank of England for emergency funds. By early afternoon in London, Northern Rock's shares, which had lost 32% on the previous Friday, fell a further 40% from 438 pence to 263 pence.Later that day, the Chancellor of the Exchequer, Alistair Darling, announced that the British Government and the Bank of England would guarantee all deposits held at Northern Rock. Northern Rock shares rose by 16% after this was announced.
Till next time- happy investing!
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