Support grows for motion tabled by MP Chuka Umunna to return nationalised lender to the mutual sector
Political pressure for the remutualisation of Northern Rock is gathering strength: 100 members of parliament have signed an early day motion backing the return of the nationalised lender to the mutual sector.
Chuka Umunna, the Labour MP who tabled the motion, said 19 MPs had lent their support in the past week.
Northern Rock and UK Financial Investments (UKFI), which looks after the taxpayer's interests in the bailed-out banks, have appointed Deutsche Bank to explore options for the Newcastle-based lender. Deutsche will present ideas to UKFI that could be used as the basis of any recommendations made about Northern Rock to the chancellor.
The lender, notorious for granting 125% mortgages before the financial crisis, was nationalised by Labour in February 2008 after it suffered the first UK bank run in living memory and thousands of anxious depositors queued round the block to withdraw funds amid fears about its solvency.
After it was rescued by the government, the bank was split to create Northern Rock plc, the "good" bank that has resumed lending, and Northern Rock Asset Management, the "bad" bank that was merged with Bradford & Bingley's mortgage business, another nationalised casualty of the credit crunch. Deutsche is looking at the options for Northern Rock plc.
While Labour was in office, the then Treasury minister Sarah McCarthy-Fry revealed that ways of remutualising Northern Rock had been considered, but warned: "I'm not pretending it's going to be easy."
Coventry building society has presented itself as being interested in linking up with Northern Rock, although little information has emerged as to how it might facilitate any deal. An analysis by Landman Economics has suggested that "profit participating deferred shares" could help the government recoup the money tied up in the lender. Landman's analysis concludes that a trade sale or stock market flotation would not raise enough funds to pay back the taxpayer in full.
Labour ex-minister Gareth Thomas, who has campaigned for the Rock to be remutualised, said he had doubts about whether George Osborne was interested. "I do not believe the Treasury is taking this seriously," he said.
Another option is merging the 70 Northern Rock branches with the 600 that Lloyds Banking Group has to sell to comply with EU rules on state aid.
Source: http://www.guardian.co.uk/business/2011/may/01/northern-rock-remutualisation-mps
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