The European Commission today approved the split of Northern Rock into a ‘good’ bank and a ‘bad’ bank, but the BSA says the new bank will still gain unfair competitive advantages by still having Government guarantees on deposits.
BSA director-general Adrian Coles says: “The EC states that splitting Northern Rock will not unduly distort competition – but we don’t believe that the new competitive framework surrounding Northern Rock goes far enough to ensure this.
“Given the split, the 100 per cent Government guarantee on Northern Rock’s retail deposits should now be removed. Until this happens, we strongly believe that Northern Rock should pay a fee to the Government for the benefit of this guarantee.”
The BSA welcomed pledges that would see the new ‘BankCo’ mortgages and savings banned from the Moneyfacts top three best buys and continued size restrictions of the bank’s savings book.
It also wants the new bank to have to pay a fee to the Government for retaining ‘AssetCo’, its ‘bad’ banking half, and it says the new bank should be forced to lend in areas that other mortgage lenders are currently shying away from, such as higher loan to value mortgages and first-time buyer loans.
Ultimately, the BSA says the best move by the Government would be a remutualisation.
Coles says: “In the longer term, we believe there is a strong case for returning Northern Rock to the mutual sector, thus encouraging diversity, competition and a more prudent approach to business than might otherwise be achieved.”