Remutualise Northern Rock, societies tell Osborne

Northern Rock should be remutualised rather than sold on to an existing banking group, the Building Societies Association said today.

In its submission to Chancellor George Osborne ahead of his Budget next week, the BSA said returning Northern Rock to the mutual sector would help "counter-balance the short-termism of the City".

Last week Deutsche Bank was appointed by Rock and its taxpayer stakeholder UK Financial Investments to advise on ways of returning it to the private sector.

Adrian Coles, director general of the BSA, said: "The BSA welcomes the commitment by the Government to foster diversity, promote mutuals and create a more competitive banking industry. Keeping a reformed Northern Rock independent of the big banks would be good for competition."

A proposal by Streatham MP Chuka Ummuna for a feasability study on remutualising the Rock has received backing from more than 50 MPs across all parties.

Coles said: "A re-launched and remutualised Northern Rock can repay the taxpayer stake over time. A deferred payment profile can give the optimum outcome, returning the full value to the taxpayer and achieving other public policy goals, such as increased stability and competition."