There are plenty of reasons to worry about the nationalisation of Northern Rock but the new blow it may deal to the UK’s reputation as a centre for financial services is not one of them.
The British government’s decision to wrap the troubled bank in its embrace cannot be positive. Nobody likes to see the rights of shareholders overriden (although in Northern Rock’s case, investors had known since September that they were running a risk of being wiped out). But apart from spamming a new set of gloomy headlines round the world, the UK Treasury’s announcement of “a temporary period of public ownership” for the Rock does not leave the City of London any worse off than it was in September.
For a brief period last year, the Rock was a millstone for London’s international reputation and competitors had no compunction alluding to it. The affair remains a hindrance to promoting the British regulatory model more widely. But the main damage has been done. Move on.
Wall Street, Paris and Frankfurt would be unwise to cast stones at the UK, anyway. Five months since the Rock’s rescue began, their own financial glass-houses are looking far more fragile.
The German government has just launched a €1.5bn bail-out of the lender IKB. The Americans have their own sub-prime mess to clear up. And the wounds of the Société Générale scandal are too fresh for the French to boast (as economy minister Christine Lagarde did in October) about “the security and solidity of France’s regulatory structure”, compared with Britain’s shaky model. It can be no coincidence that Alistair Darling, the UK chancellor, name-checked the US and Germany in Sunday’s statement on nationalisation.
Remember, too, that from Sweden to Japan, bank nationalisation in its various forms is a time-honoured, if not an honourable, way out of financial disaster. A private-sector solution, quickly executed, would have been the best solution for Northern Rock. Nationalisation is, in that respect, a defeat. But after “Northern who?”, the most common reaction from habitual nationalisers outside the UK will be: “Well, at last they got round to it.”