The Labour peer, John McFall, prior to the election a redoubtable chair of the treasury select committee, is to be a director in a new banking venture that will compete to buy government-backed assets such as Northern Rock and a portfolio of branches of Lloyds Banking Group.

Sir David Walker, who last year published a report on corporate governance, and Charlie McCreevy, the former European Union internal markets commissioner, will join McFall as directors. Lord Levene, a crossbencher and outgoing chairman of the Lloyd’s of London insurance market, will serve as chairman to the new venture.

While Julia Finch, writing in the Guardian, sees the seeking of profit as evidence of impure motives on their behalves, the assembled cast of wise old heads think that they have spotted a need for a traditional banking service provider that concentrates on getting the basics of customer service right. “There is room for a trusted retail bank,” one investor in the new venture told the Financial Times.

After the events of the last few years, it’s hard to argue with this. However, some Labour and Co-operative activists have been keen to see this trusted service provision be delivered by turning Northern Rock into a mutual. They may be displeased if McFall scuppers these hopes.

Nonetheless, having castigated the likes of Adam Applegarth for exotic securitisation and sub-prime practices from the treasury committee chair, it is admirable to see McFall having the courage of his convictions to put his belief in traditional banking practices into action. If households and businesses can access trusted financial services, which have been so lacking of late, as a consequence of McFall, it seems po-faced – pace Finch – to begrudge him a few quid by way of reward.

There is likely to be scope for him to do so and for further development of mutual banking models. In addition to the Northern Rock banking network, McFall’s venture is interested in purchasing the 600 Lloyds branches that the European Commission are requiring the bank to sell by 2013 on competition grounds. Prior to this, the venture hopes to build up its portfolio by purchasing some smaller banks.

Tags: banking reform, Mcfall, Sir David Walker, Treasury

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