Northern Rock’s government guarantee will be lifted on 24 May 2010.

Following extensive consultation with the Financial Services Authority, the UK government has announced that its retail savings guarantee for Northern Rock can be released in a move that will see the company “return to independent, commercial strength”.

In real terms, the move means that the building society will be able to operate and compete on the same terms as its bank and building society peers.

The guarantee of retail deposits – or savings – was put in place in early 2008 when the bank was threatened with closure and was used as a tool to help restore the confidence of customers by ensuring their savings were safe.

Financial Services Secretary to the Treasury, Paul Myners, said: “The government’s actions to stabilise Northern Rock protected the savings of millions of families and the jobs of thousands of workers.

“Over the last two years, we have worked to get the bank back to financial health. Today’s announcement shows how far we have come. Depositers can have confidence in Northern Rock.”

The Building Societies Association (BSA) has actively lobbied for the removal of Northern Rock’s 100% savings guarantee.

Director-General of the BSA, Adrian Coles, said: “The removal of Northern Rock’s guarantee is welcome as a significant step towards returning the cash savings market to a level playing field.

“Societies are fast becoming the only providers of financial services not to be directly subsidised or supported by the state.”

Following the removal of the guarantee on 24 May, customers will continue to have the first £50,000 of their deposits protected by the Financial Services Compensation Scheme (FSCS) – the same level of cover customers of all banks and building societies in the UK benefit from.

Gary Hoffman, Northern Rock’s Chief Executive, welcomed the decision: “This is another positive step in the right direction and the decision reflects our good progress and the strong capital position of Northern Rock.

“The Company is returning to level playing field and our savers will enjoy exactly the same level of protection, under FSCS, as customers of other UK banks and building societies.”