THE UK Government could soon look to offload its Guernsey branch of Northern Rock following yesterday’s nationalisation. There are widespread reports that it is looking to slash thousands of jobs and sell off branches.
And ownership of the local subsidiary is expected to sit uncomfortably with a Labour administration when many of its MPs consider Guernsey to be a tax haven.
Tax Justice Network founder and Tax Research LLP director Richard Murphy did not think the government would own the local bank for long.
‘They will close or sell it - purely for commercial reasons,’ he said.
‘I suspect they will get rid of all non-core parts of the business, which include the Channel Islands and Irish branches.’
He did not think that investors with the local subsidiary had anything to fear.
‘I don’t think they would expect Northern Rock (Guernsey) to open up its books for inspection by HM Revenue and Customs,’ he said.
‘It’s very difficult for tax inspectors to gain information anyway and they don’t have the right to just go to another government department and ask for it.
Guernsey Financial Services Commission director-general Peter Neville said HM Treasury had confirmed that Northern Rock was open for business as usual.
‘The change in the ultimate ownership of Northern Rock PLC will not result in any changes to the way in which the GFSC regulates Northern Rock (Guernsey) as a licensed entity,’ he said.
The GFSC would be asked to approve a change of controller for the local firm as a wholly-owned subsidiary of Northern Rock PLC.
Northern Rock (Guernsey) director John Robinson said the intention was for the new executive chairman to be instructed to run the bank at arm’s length from the government in a business-as-usual manner.
‘The objective is to return the business to a more sustainable size,’ he said.
GuernseyFinance chief executive Peter Niven did not think the UK Government’s ownership of a Guernsey bank would harm the island’s reputation as a finance centre.
‘I don’t think we will have been on Northern Rock PLC’s radar as having a subsidiary here because it’s so small,’ he said.
‘I don’t believe it will have any effect on our standing at this stage and I can’t envisage us coming to any harm in the coming months.’
He was sure the GFSC would watch the situation very closely.
Mr Niven said newly-installed Northern Rock chief executive Ron Sandler had a long history in financial services and it would be interesting to see his stance on the Guernsey situation.
‘It depends on the remit he has and whether they see the Guernsey operation as something they would keep for the future,’ he said.
The situation could work two ways, he said.
‘Northern Rock relied heavily on the wholesale money markets to fund lending and they had a problem.
‘But that was a particular business model and most banking operations will look to get the deposits in and then lend.’
UK Chancellor Alistair Darling announced the reasons for the short-term nationalisation to MPs at Westminster yesterday.
A UK Treasury spokesman said the decision had been taken in line with the principle of protecting taxpayers and depositors and ensuring wider financial stability.
It was now a question of waiting to see the new management’s business plan for the branch network.
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