Can Northern Rock be made a mutual building society again?
The Chancellor, Alistair Darling, is not opposed to mutuality. But Treasury civil servants want the £14.5 billion of tax payers money returned to the government soon. 100 Members of Parliament support mutualisation of Northern Rock.
To mutualise or not? Who will win; and why does it matter?
Supporters would gain a lot. Savers would feel that their money was more secure in a mutual building society than in a bank; or a building society that had also become a bank; or in a high street bank with or without more risky investments in hedge funds etc.. More jobs could be created in the North East of England. Existing jobs in Northern Rock would be more secure. There would be more choice and competition with the few mutuals left, specifically the largest Nationwide. Mortgages might become easier to get; if not cheaper.
Critics of mutualisation would also gain. In particular, the good reputation of British banking, as measured by indices in America, would be enhanced. This is important as their have been rumours that one index might reduce it’s rating for Britain. This undermines international confidence in Britain and its banks; indeed in the whole economy. Returning the £14.5 billion would give a big boost to international confidence, and help the banking industry to grow.
But how bad is this reputation. Of the main big banks Barclays has received nothing from the government: neither has HSBC, which took over the old Midland bank. Barclays has received money from the Middle East. HSBC is a truly international bank, with large assets in the Far East.
Lloyds bank, now incorporating Royal Bank of Scotland, and Nat West and Halifax, currently has the government as a major shareholder. But Lloyds is about to offer shares to existing shareholders to raise more capital. This may be a controversial move, but the bank is attempting to assert control over itself. Does all this suggest a bad reputation?
What do you think?