Northern Rock speculation amid building society calls
Jul 9 2009 The Journal
Several suitors have already reportedly been identified, including Virgin Money, which tried to buy the Rock at the time of its collapse in 2007 before the group’s eventual nationalisation in February 2008.
But the Government also wants to strengthen the role that mutuals play and to encourage the entrance of foreign lenders into the UK after many withdrew amid the credit crunch. Any sale of the Rock will not occur until after the European Commission has delivered its verdict on the proposal to inject new Government funding into the Newcastle bank. Once it receives the green light from Brussels, the bank will then proceed with plans to split the business into two parts, which would then lead to a sale.
Meanwhile, Mr Darling dismissed recent calls for rules that limit bank size as “simplistic”.
The argument “fails to take into account the complexity of our financial system”, he said.
He hit out at suggestions retail and investment banks should be split, with their own regulatory system.
“One regulator for one category and another for the rest seems to me to miss the point,” said Mr Darling.
But the decision not to break up banks was met with disappointment by some, with independent think-tank the New Economics Foundation blasting the Government for failing to “get to grips with the root of the problem”.
“We have only 170 bank branches per million people in the UK, compared to 520 in Germany and 960 in France,” said Stephen Spratt, chief economist at the NEF.
“This is hampering our recovery and undermining enterprise – it did so before the crash, and will only be worse after the crash unless the government sets out plans to break up the failed banks to create the new regional banking system we so urgently need.”
