Fears mount about exodus of Northern Rock savings

Fears grew yesterday that panic among savers at British bank Northern Rock will see a run of withdrawals after estimates that £1 billion have already been taken out.

The Bank of England stepped in on Friday to rescue Northern Rock, Britain's fifth-biggest mortgage provider, pledging to provide emergency funds after a global credit crunch hit the bank's ability to raise cash in money markets.

Customers withdrew about £250 million from branches on Friday, a person familiar with the situation told Reuters, and the Financial Times said a bigger sum had been taken out via its Website. The paper, citing an unnamed source, said the total withdrawal was £1 billion, or about four pecent of deposits.

Northern Rock declined to comment on the amount of withdrawals.

But the bank urged customers not to panic and said it had not drawn on the BoE lending facility.

"It should be reassuring that the Bank of England is prepared to make this facility available," a spokesman said.

"They would only have done it for someone that is well capitalised and solvent."

But similar reassurances from the BoE and regulators were not being heeded by thousands of the bank's 1.4 million savers, and panic was evident as long queues formed at its 72 branches for a second day.

"I just can't take the risk of there suddenly being an announcement that... there's been another problem and they've closed the bank. I'm erring on the side of caution," one customer told Sky News.

The funding turmoil and the threat that the run on deposits will gain momentum means it is likely to be taken over by a well capitalised rival, many analysts predict.