WE'VE ALL HEARD THAT EXPRESSION...
BUT NEVER WAS IT SO APPROPRIATE AS WHEN THERE WAS, LITERALLY, A RUN ON THE BANK, NORTHERN ROCK.

So picture the scene: It’s 1823 in the Wild West. You’re in a dusty town, in a dusty state, with the sun beating down. People ambling, sleepily around the dusty streets. Yup, there’s a lot of dust in 1823! A crowd assembles from nowhere. Quiet conversation quickly escalates into shouting, people pointing to a building. THE BANK. There’s a rumour going round - the Bank’s going bust. No!

'YOUR MONEY OR YOUR LIFE!'
As in one motion, the crowd, now larger, run towards the bank, shouting “Give us our money. We want out money!” They surge up the Bank’s steps and flood the banking hall, where the clerks cower behind their iron clad tills. “Give us our money - or we’ll shoot!”

SHORT OF CASH
Well, this wasn’t quite the scene outside the branches of Northern Rock a few weeks ago, but, in essence, the story was the same. News was circulating that the bank may be in trouble. Problems in the USA had triggered a credit crunch meaning that banks were finding it difficult to borrow money from each other. This is how banks finance their business, which is, basically, lending money to people and companies.

With money in short supply, Northern Rock were finding it difficult to lend money to home buyers. News got round that they were short of cash, and just as they did in the Old West, people panicked. A run on the bank started - only in this case, people queued in an orderly fashion waiting their turn to withdraw their savings.

BAD NEWS?
This was not good news for Northern Rock as over £1 billion was withdrawn in a matter of days. Now whilst the bank had assets (what they own) many times that amount, it was still not good news. Banks survive on trust. We all believe that banks are safe places for our money. When things go wrong like this, we all get jittery. Then it emerged savers would only get back part or a percentage of their savings money if the bank did go bust.

But this was not the end of the story because savers were still worried they might lose part of their deposits, if a bank went out of business. So the government jumped in and said: Hey-ho! Not to worry chaps. We’ll GUARANTEE all savings. So that was alright, wasn’t it. Well, not quite. Problem was (and not a lot of people actually picked this one up), that if everybody had actually gone to their banks demanding their money back, there and then, the government wouldn’t have had the money to pay their own guarantee. Oops! Still, it all sorted itself out. The Bank of England’s loan to Northern Rock helped them stabilise their business, and now several groups of banks and investors are interested in buying them out.

Are our savings safe in the banks? Yes - probably. But remember, all it takes is a bit of bad news to de-stabilise the whole system. Banks have reputations for being safe havens for cash. It takes a lifetime to build a reputation, and five minutes to destroy it.