The Building Societies Association and the British Bankers’ Association have warned that they are watching for any sign of unfair competition from Northern Rock.
The bodies have voiced concerns over the potential for unfair competition in the market following the Government’s decision to nationalise Northern Rock, turning it into the “safest bank in Britain”.
A BSA spokesman says: “We are certainly watching the rates of interests being offered to savers by Northern Rock. We are concerned about the potential for unfair competition in the market.”
The BBA says it is seeking clarification from the Government on how Northern Rock will be allowed to compete.
Northern Rock chairman Ron Sandler. who is being paid £9,000 a month, has until the European Commiss-ion deadline of March 17 to prove that taxpayers’ money is being used as restructuring aid, not rescue aid.
The Government faces severe criticism from Northern Rock shareholders who are preparing to launch legal action against the decision to nationalise.
Law firm Edwin Coe, which represented Railtrack shareholders in an unsuccessful case against the Government after it was put into administration, has warned that there will be a similar legal battle over Northern Rock.
The Association of Chart-ered Certified Accountants chief executive Allen Blewitt says Northern Rock’s fate “will surely give would-be demutualising financial institutions pause for thought”.
The ACCA wrote a report two years ago for an inquiry by the all-party Parliamentary group on building societies & financial mutuals into whether demutualisations enhanced performance. At the time, Northern Rock was found to be the main success story of demutualisation.