It says Treasury proposals to split Northern Rock into a good bank, BankCo, and a bad bank, AssetCo, will give it an unfair advantage.
It says BankCo should be required to pay an annual premium to the Government to cover part of the cost of the protection it has gained from the establishment of AssetCo.
The BSA also wants the Government guarantee on retail and wholesale deposits scrapped, as it gives BankCo to cheaper funding.
Northern Rock revealed it would be deferring paying interest on a number of subordinated bonds until the EC approves its restructure.
The BSA says: “BankCo is likely to be able to lend freely, without having to absorb losses from any non-performing loans, unlike all of it competitors in the UK mortgage market, to varying degrees.”
A Treasury spokesman says: “This revised plan is the best means of ensuring the business can meet its new lending commitments while also complying with state aid rules.”
Skipton group chief executive officer David Cutter says: “The real or implied savings guarantees enjoyed by state-backed providers are of particular concern in the low interest rate environment where competing for a fair share of retail deposits is already challenging.”