Northern Rock could still be a mutual

Yuan Phoon

August 3, 2011

The report compiled by Oxford and Loughborough universities and Mutuo, a lobbying body for mutuals, argues the remutualisation of Northern Rock would enhance the competitive pressure on banks.

It also suggests it would help build a more diversified financial services sector and create a more durable and sustainable business said the report The remutualisation of Northern Rock.

The report then claimed that the banking crisis highlighted the importance to the UK economy of retaining diverse models of financial service providers.

The report said: “Mutuals, though affected by the downturn, proved more stable than proprietary banks. Given the barriers to entry to setting up a new mutual of any size in the deposit-taking sphere, it makes sense to explore the remutualising of a mature ex-mutual business, as well as conserving remaining mutuals.”

It said that such a mutual would repay the government’s stake over a longer period of time, potentially recouping more for the taxpayer in the long run.

Hunt said: “The government needs to take account not only of cash returned to the taxpayer, but also the advantages of a more diversified and competitive financial sector.

“If there is a trade off between an immediate cash repayment and wider systemic benefits from an enhanced mutual sector, the taxpayer has a legitimate interest in remutualisation. The systemic and competitive benefits of this would likely outweigh any cash benefit derived from a quick sale.”

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