OFFICE OF FAIR
TRADING News Release (28/09) issued by COI News Distribution
Service. 10 March 2009
The OFT has today
published its report on the impacts of public support for Northern
Rock on competition in financial services.
The report fulfils a Government commitment given to Parliament
during the passage of legislation to nationalise Northern Rock in
February 2008. This stated that the OFT would publish an annual
report assessing any competitive implications of public support
for Northern Rock.
The OFT considered two possible areas of concern arising from
public support for Northern Rock. Firstly, that a public
perception of Northern Rock as 'safer' than other banks
could distort the personal current account, savings and investment
product markets, and secondly that Northern Rock might be able to
take advantage of a lower cost of capital to offer mortgages at
lower prices and so increase its market share. Taking into account
the available information, including the constraints placed on
Northern Rock by its 'competitive framework', and in the
context of severe financial instability in the year to February
2009, the OFT has concluded that public support for Northern Rock
did not, during that period, have a significantly adverse impact
on competition.
The OFT will consult on a Financial Services Strategy in March
2009, which will lead to a Financial Services Plan later in the
year. The Plan is expected to cover consumer and competition
issues across the financial services sector. This would encompass,
where appropriate, consideration of competition issues relating to
public support to banks, including where relevant, Northern Rock.
Today's OFT report is available at http://www.oft.gov.uk/northernrock
NOTES
1. Northern Rock was taken into temporary public ownership in
February 2008.
2. Chief Secretary to the Treasury Yvette Cooper made the
commitment that the OFT would 'publish an annual report
assessing any competitive implications of the public support for
Northern Rock' on 21 February during a parliamentary debate
on the Banking (Special Provisions) Bill. The official report of
the debate can be accessed at: http://www.publications.parliament.uk/pa/cm200708/cmhansrd/cm080221/debtext/80221-0020.htm
3. The competitive framework was included in Northern Rock's
restructuring plan which was published in March 2008. The
framework contained specific targets and commitments to ensure
that Northern Rock did not gain an unfair advantage as a result of
the public support it was receiving.
4. Since the OFT completed its analysis, revisions to Northern
Rock's business plan have been announced. There has been a
change of strategy and instead of decreasing its mortgage book
Northern Rock will now increase mortgage lending. The OFT has not
considered this as it falls outside the period of the report.
http://www.oft.gov.uk
PUBLIC enquiries: 0845 7224499 enquiries@oft.gov.uk
OFT
reports and consumer information leaflets are available free
from:
OFT, PO Box 366, Hayes UB3 1XB 0870 6060321 oft@eclogistics.co.uk