Banks alert to Northern Rock advantage

by Gill Montia

Story link: Banks alert to Northern Rock advantage

Leading UK banks are unhappy at the nationalisation of Northern Rock because they believe the mortgage bank could gain a competitive advantage that would affect their business.

In addition, MPs have raised concerns that repossessions could rise because the Government has announced that post nationalisation it will be “business as usual” at Northern Rock.

This has led to fears that new customers could borrow more than their homes are worth.

According to opposition MPs, unsecured loans at Northern Rock have been charged at 12.9%, compared with 13.1% at the Halifax, 15.4% at NatWest and 18.9% at Lloyds TSB.

CBI director general, Richard Lambert, says: “It is critically important that state ownership of the bank should not be allowed to distort the savings market, through access to government funds on favourable terms.”

Adrian Coles, of the Building Societies Association, is fearful that taxpayer aid for Northern Rock could “lead to pressure being put on organisations that have not failed and do not need taxpayer support”.

Furthermore, the Government has remained silent on claims that taxpayers face a £100 million bill for the cost of advice from banks and lawyers during the failed efforts to sell the bank.

In a television interview, Chief Secretary to the Treasury, Yvette Cooper, told Newsnight: “I can’t tell you what the figure is. But what I can tell you is that when a bank gets itself into trouble, inevitably there are fees and costs involved.”