BSA welcomes removal of Northern Rock's 100% savings guarantee

Commenting on the announcement today that Northern Rock will in three months have its 100% guarantee on savings removed, Adrian Coles, BSA Director-General, said: "The removal of Northern Rock's guarantee is welcome as a significant step towards returning the cash savings market to a level playing field.  

"The BSA has actively lobbied for the removal of Northern Rock's 100% savings guarantee as societies are fast becoming the only providers of financial services not to be directly subsidised or supported by the state.  Banks, NS&I and the Post Office all have significant public sector support.  The guarantee has enabled Northern Rock to attract substantial inflows following the bank's nationalisation.

"The Government should also consider setting a negative, or at the very least zero, financing target for NS&I in 2010/11 to avoid further distortions from NS&I.  We also call on the Treasury to ensure that the part-nationalised banks - Lloyds and RBS - do not operate in a way that distorts the savings market through their Government ownership.

"In the longer term, we believe there is a strong case for returning Northern Rock to the mutual sector, thus encouraging diversity, competition and a more prudent approach to business than might otherwise be achieved."