David Prosser: Mutuality isn't such a hard place for Northern Rock

Outlook In the wake of the credit crisis, it is rather too easy to fall into the trap of judging banks bad and building societies good. While the mutual sector had a good war – particularly compared with the former mutuals that blew up during the crisis – the building-society movement was not without its own casualties.

Still, it is a matter of regret that it now seems highly unlikely the process of returning Northern Rock, or at least the "good" part of it, to the private sector will see it regain the mutual status given up in 1997. The inside word from the sales team is that none of the mooted building society bidders has followed through on their interest. Nor does the Chancellor seem to be considering anything other than a straight sale.

One can understand the political expediency of making a start with returning rescued banks to theprivate sector. The desirability of getting these assets off the taxpayers' books is part economic – we need the cash – and part ideological – the state should not be in the banking business. Plus the sales will finally bring some closure to the credit-crunch saga.

That's not to say, however, that we should simply take the easiest and quickest option with Northern Rock. It's not as if taxpayers are poised to make a handsome return on the bank – quite the reverse, in fact, since it is now likely to be sold at a £300m-£400m loss. In time, we will probably still make a return on the saving of Northern Rock, since the "bad" part of the bank, which is remaining with the state, looks likely to recoup those losses and more.

But if we are prepared to be patient, why not take a little more time to explore other options for the current sale process? Selling Northern Rock to an existing building society is not the only way to remutualise it – just a way to do so while getting cash for it up front. Supporters of the sector, such as Mutuo, have published feasible models for returning Northern Rock to customer ownership while paying back the taxpayer its investment over time. These models might even produce a greater eventual return.

The previous government's post-banking crisis white paper contained an explicit commitment to boosting mutually-owned financial-services companies, while the current administration has made similar pledges (and not just in finance). And having asked the Independent Commission on Banking to look into improving competition in the banking sector, one would have thought the Treasury would seize every opportunity to promote a diverse range of business structures. Northern Rock is the ideal place to start.