The Government should turn Northern Rock back into a mutual to avoid a repeat of the credit crunch, according to the Building Societies Association (BSA).
In its latest report, the BSA says failed banks should be converted into mutual organisations to strengthen competition and create a more diversified financial sector.
It says a remutualised Northern Rock would help the Government meet its policy objectives of supporting competition and diversity through the maintenance of a strong mutually-owned financial sector.
Mutuals can disperse wealth to regional and local economies by reducing the concentration of financial sector resources and employment in the City, the report says. 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, it concludes.
The BSA says a re-launched and remutualised Northern Rock can repay the taxpayer stake over time as a deferred payment profile can give the optimum outcome by returning the full value to the taxpayer.
Jonathan Michie, primary author of the report and professor of Innovation and Knowledge Exchange at the University of Oxford, says banks must face strong competition from mutual building societies to avoid a repeat of the credit crunch.
He adds: "We must not allow the UK's financial services sector to return to the 'business as usual' model that has proved so costly to the economy and public finances. Already we are seeing a return to the bonus culture."
Adrian Coles, director-general of the BSA, says: "The Government has said that financial mutuals can provide a robust alternative to financial services companies in the future - what better way to demonstrate this than to seriously consider returning Northern Rock to the mutual sector?"
More than half of people over the age of 55 see financial security as a top priority in retirement, yet a third allocate more time to buying a new car, research from Legal & General (L&G) has found.
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Alongside Barrett, Hopkins, Boston and Thorman on 17 October