MPs urged to mutualise Rock
BUILDING societies have urged the government to put Northern Rock back under customer ownership, arguing the move would help create a stronger financial services sector.
Northern Rock and other failed banks should be turned into building societies, or “mutualised”, and allowed to repay their taxpayer stakes over time, according to the Building Societies Association (BSA).
BSA said a report released yesterday shows there are three strong economic arguments for creating a bigger mutually-owned company sector in the UK.
A financial system with diverse ownership structures, rather than all companies being owned by equity markets, would create a bio-diversity that will see it weather financial crises better, the report said.
And mutuals tend to adopt a lower risk profile because their objective is safety and fair pricing for members, not profit extraction for shareholders, the BSAsaid.
Finally, keeping Northern Rock independent of the big banks would be good for competition, it said.
The bank is currently being split into a “good bank”of profitable assets and “bad bank” of toxic debts.
John McFall, the Labour chairman of the Treasury Select Committee, said: “If ever there was a time for an expanded mutual sector, it’s now. We desperately need to restore faith in financial services in this country.”
Northern Rock had been a building society but it demutualised in 1997, along with rival Halifax, handing members a windfall payout in return for giving up their ownership, and became a market-listed bank.
But the Rock fell under government ownership last year after collapsing in the financial crisis.