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March 17, 2008

Danish banks lodge complaint over Northern Rock

by Gill Montia

Story link: Danish banks lodge complaint over Northern Rock

Leading Danish banks have complained to the European Commission about the “extraordinary protection” provided to Northern Rock savers by the UK Government.

The complaint is the first made about the bank to the commission since it was nationalised and alleges that the Treasury guarantee to savers means that Northern Rock enjoys an “unfair competitive advantage”.

Northern Rock is currently offering a number of savings products with rates of 6.25% and the Danish banks point out that this could lead to a “distortion of competition” in the market.

Meanwhile, the Building Societies’ Association is considering lodging a complaint with the Office of Fair Trading over Northern Rock and the British Bankers’ Association is asking for the bank’s savings products to be tied to those offered by its competitors.

In related news, Ron Sandler, Northern Rock’s chairman, is currently preparing a business plan that will be scrutinised by the commission.

He is expected to reduce Northern Rock’s mortgage book to around half its current size and at the same time cut jobs.

Northern Rock employs around 6,000 staff, the majority of whom are based on Tyneside.

It is understood that Mr Sandler is working on a number of proposals to reduce job losses, one of which involves Northern Rock staff administering mortgages on behalf of other lenders.

 

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