Police officers have been called to break-up panicked crowds gathering to withdraw their savings from Northern Rock.While the Government and the City said there was no need to panic, savers ignored the reassurances, withdrawing close to £1billion yesterday.

Staff at Glasgow city centre branch called police to deal with ‘boisterous customers’. Two plain clothes officers arrived just before the bank’s official Saturday closing time of midday. A spokesman for Strathclyde Police said: “A call came in asking for assistance as some of the customers were getting a bit boisterous. The manager was spoken to and police advised the store to close.”

The dramatic scenes followed the admission by Northern Rock, Britain’s fifthbiggest mortgage lender, that it was running out of ready money. Its share price plunged by a third – amid falls across the FTSE 100 index – as the market digested the implications of the Bank of England acting as a “lender of last resort” for the first time in more than 30 years.

After the news broke, lengthy queues spilled on to the streets as Northern Rock’s staff attempted to reassure worried customers they would not lose their life savings.

The bank also had to close down its website, which could not cope with the flood of savers trying to transfer their money.The mortgage bank is the first major British victim of the ‘crunch’ triggered by the failure of thousands of risky mortgages in the U.S. It has found it impossible to borrow money from international banks, which are wary after losing billions as a result of the ‘sub-prime’ fiasco.

Chief executive Adam Applegarth said the crisis was the worst he had seen in 25 years. However, he added: “My advice to customers is, with the Bank of England providing this liquidity, they should be greatly reassured.

“If I was a depositor – and I am – I would be reassured if the Bank of England was behind me.”

source: Daily Mail September 7th 20007

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Questions:

1. Explain the terms in bold print.
2. What does the table reveal about banks’ exposure in 2007?
3. Were people right to be concerned?