BSA urges remutualisation of Northern Rock

by Gill Montia

Story link: BSA urges remutualisation of Northern Rock

In a report published yesterday, the Building Societies Association (BSA) argues that the UK’s failed banks could adopt a mutual status.

In particular, the Association urges the Government to “consider seriously” returning Northern Rock it its mutual roots.

The report, by the Centre for Mutual and Employee-owned Business at the University of Oxford, concludes that there are three economic arguments for a stronger mutual sector as follows:

Mutuals can counter-balance the short-term pressures of the City; help reduce the concentration of financial sector resources and employment in the City and disperse wealth and welfare to regional and local economies.

In addition, mutuals tend to adopt a lower risk profile because their objective is safety and fair pricing for members, not profit extraction for shareholders.

On the subject of competition, the study states: “A remutualised Northern Rock would help the Government to meet its policy objective of supporting competition and diversity through the maintenance of a strong mutually-owned financial sector.”

The BSA also believes a mutualised Northern Rock would provide value to the taxpayer as a “deferred payment profile can give the optimum outcome, both returning the full value to the taxpayer and achieving other public policy goals”.

The BSA’s director general, Adrian Coles, says: “The Government has said that financial mutuals can provide a robust alternative to financial services companies in the future – what better way to demonstrate this than to seriously consider returning Northern Rock to the mutual sector”

Northern Rock was a building society up until October 1997 when it converted to a bank.

In February 2008, it was taken into temporary public ownership where it remains today.