Could other banks end up in public ownership?
February 25, 2008
Some industry official are expressing concern that other banks, building societies, and financial institutions could end up under public ownership in the same way as Northern Rock, stating that the Bill that was recently rushed through parliament to enable the ailing bank Northern Rock to be nationalised is actually a generalised bill and could actually apply to any financial institution that takes deposits.
One industry official said that the nature of the Bill and the way in which it was rushed through indicated that there is a risk out there, although government officials insist that there will not be a string of banking crises like the one faced by Northern Rock last year, when it became the first victim of a run on a British bank in around 150 years.
One senior financial official recently stated: ‘They are obviously concerned that there is something else out there - or else they would be doing that in a much more leisurely, properly organised process through Parliament. It is odd that they are rushing through at pace the ability to nationalise other banks which makes you wonder if they are worrying about it.’
The Chancellor of the Exchequer has already admitted that the Bill ‘potentially applies to a range of financial institutions’. However, he also added: ‘I want to make clear that the Government has no intention at present to use the Bill to bring any institution into temporary public ownership other than Northern Rock.’
A number of officials and consumers are concerned over how further nationalisation of financial institutions could affect the public purse, and some have predicted that the current financial crisis will end up hitting the larger bank hard as conditions get tougher.
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