AS queues at Northern Rock branches dwindled yesterday, the Government could have been forgiven for awarding itself a pat on the back for helping to end a crisis that seemed about to spiral out of control.

Chancellor Alistair Darling's pledge that the Government would 100 per cent guarantee Northern Rock savers' cash halted the unrelenting tide of customers withdrawing their money.

Shares in the bank also began to recover yesterday, while Northern Rock said eight out of ten calls to its call centres were about reinvesting money in the bank.

Financial experts broadly welcomed the Government action, but said important lessons had to be learned from the crisis, which began last week when Northern Rock applied to the Bank of England for emergency funding.

They also rejected claims that Northern Rock had been treated as a special case while, at the same time, warning that although its immediate future was secure, its long-term future remained uncertain.

Anthony Platts, an assistant director at the Teesside office of investment management firm Wise Speke, said: "It is a very dangerous thing to allow any run on a bank to continue in this way, whereby people are queueing up to recover their savings.

"The Government had to act and it is very encouraging and a good sign that they have now put this guarantee in place."

Mr Platts said Treasury officials would have carefully thought through the pledge of a guarantee.

He said: "Without this, there could have been continuing withdrawals and that could have caught on to other banks, which could also have been hit in this way.

"The Bank of England has a duty to regulate the financial system, which means making sure it is run in an orderly fashion.

"There will be a sense of relief that the panic that has been going round has been stopped."

Mr Platts said that the apparent recovery of Northern Rock's share price would provide further assurances to shareholders and investors that it was a viable and solvent institution.

But he said irreparable damage could still have been done to its reputation, making a sale more likely.

He said: "The brand could have been damaged by this panic run. It could be that a sale will be in the best interests of everyone."

James Ramsbotham, chief executive of the North-East Chamber of Commerce, and a former banker who worked for Barclays for 14 years, said: "We are absolutely delighted that the Government has done this and it certainly has gone a hugely long way to quelling the whole feeling of unease.

"Northern Rock has been fantastic for the North-East in terms of helping our sporting prowess, the region's cultural reinvigoration and its charitable activities and it is now time for people to repay their loyalty."

He added: "With this pledge, Alistair Darling is not being reckless with Government money. He believes that there is no risk of the bank going broke, but has just taken this measure in order to make sure the public retain their faith in it."

Mr Ramsbotham agreed that while Northern Rock was not a special case, British banking as an institution was, hence the justification for the guarantee.

He said: "It is the British clearing banks that the wider community needs to have confidence in. If people ever lost faith in this institution, they would take their money out and stick it under their bed and Britain would be a much less safe place to invest and work in."

Dr Gioia Pescetto, a senior lecturer in finance at Durham University Business School, said she too believed the Government had made the right decision.

Dr Pescetto said: "Other banks will hopefully learn from this in terms of what it was that made Northern Rock vulnerable and they should be asking themselves hard questions.

"Northern Rock has never had a large deposit and savings base and has therefore borrowed heavily on money and credit markets.

"They have been very aggressive and grown fast, but because such markets are subject to fluctuations, they have been caught out."

Dr Pescetto also said the Government had to look again at whether the guarantees provided for savers' cash under the Financial Services Compensation Scheme should be increased.

She said: "As far as the Government is concerned, they and a number of parties have to get together to reassess this situation.

"It also needs to look at the assurances that are in place under normal circumstances whereby people's deposits in money in banks are protected and whether these are good enough."