Nigel Frudd, head of financial services at Rosenblatt Solicitors, said that the government's decision is 'inconsistent' with EU subsidy regulations.
He said: “Nationalisation provides Northern Rock with a guarantee that other banks cannot match and, in fact, could indirectly have exactly the opposite effect of what the government was trying to avoid – another run on the banking system.
“The major banks are desperate to collect deposits for capital adequacy reasons and you can see this in the rates they are offering in the high street."
Frudd added that a major shift to Northern Rock could end up putting the national banking system in a far more vulnerable position, adding: “It begs a couple of other questions; why should anyone have deposits with any other bank other than Northern Rock as it is guaranteed by HM Treasury and, thus, why save with National Savings and Investments?”
