Name: Rachel Le Brocq
Company: Building Societies Association

Remutualising Northern Rock would help strengthen competition and create a more diversified financial sector.  It could be expected to generate an advantage to the taxpayer over the long run in excess of the immediate benefit of any capital proceeds in the short run.

There are three economic arguments for re-launching the Rock as a mutual – diversity in financial services, risk appetite and competition.

A financial system with diverse ownership and governance structures is better able to weather the strains of the business cycle than one which is plc-dominated.  Mutuals can counter-balance the short-termist pressure of the City. Mutuals also help reduce the concentration of financial sector resources and employment in the City, dispersing wealth and welfare to regional and local economies.

Mutuals tend to adopt a lower-risk profile because their objective is safety and fair pricing for members, not profit extraction for shareholders. A remutualised Northern Rock would help the Government to meet its policy objective of supporting competition and diversity through the maintenance of a strong mutually-owned financial sector.

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In any exit process, the Government needs to achieve optimum value. Some commentators have argued that remutualisation is flawed because taxpayers would not re-coup their investment, but the taxpayer will not lose out. A deferred payment profile can give the optimum outcome, both returning the full value to the taxpayer and achieving other public policy goals.

Name: Melanie Bien
Company: Savills Private Finance

The potential remutualisation of Northern Rock could be a good move for both consumers and taxpayers. The alternative to remutualisation is selling off the business to the highest bidder in order to repay the taxpayer, but it might not fetch what it is really worth, and the ‘bad’ bit of the bank will not be attractive to prospective purchasers who will only be interested in the best customers.

Returning the lender to its members could be the long-term solution which Northern Rock needs, helping regenerate the mutual sector which has seen the number of building societies decline considerably in recent years.

A stronger, revitalised mutual sector will provide more competition, which should be good news for borrowers too as it should drive down mortgage rates and result in more choice, something that is desperately needed. Although banks must consider shareholders as well as customers, and so have two masters, for building societies, it is all about its members and their needs.

Remutualisation would enable Northern Rock to go back to basics and put members first. With 4% of Northern Rock’s customers in arrears and many trapped in negative equity, Northern Rock has a responsibility to assist those customers to which it offered high loan-to-value mortgages, ensuring they can remortgage onto a decent rate when they come to the end of their current deal. A range of competitive fixes and base-rate trackers for those who cannot remortgage elsewhere would therefore be extremely welcome.

Name: Danny Lovey
Company: The Mortgage Practitioner

Call me cynical, but the Labour Party’s suggestion to ‘mutualise’ Northern Rock rather than sell it off as a bank has nothing to do with extracting the maximum value for money for the taxpayer, but everything to do with holding onto the Labour Party’s seats in the North East.

Fond memories of Northern Rock as a cuddly mutual rather than a capitalist bank are just designed for short-term political expediency.

As I understand it, a ‘mutual solution’ is one where the savers and borrowers have a financial stake, and this would, in effect, be giving away the bank. Therefore, how can it be that this solution of mutualising Northern Rock can generate maximum value for the taxpayer?

Without the Government standing behind it, Northern Rock will struggle to be a national bank.

But it will not be impossible, depending upon who buys it and whether they rebuild its high street presence as well. However, the current rules governing mutual societies put them at a disadvantage in attracting funding. This is why so many mutual lenders pay over the odds for funding, and borrowers pay standard variable rates in excess of 5% in many cases right now, with the exception of Nationwide which has a branch on every high street.

Surely, for Northern Rock to be a successful competitor in the mainstream, it needs to be a bank not a mutual. Certainly, the way for the tax payer to extract best value is to sell it at the best price to the highest bidder and that can only be done as a bank.