Rock lessons to be learned
PROPOSED measures to help avert another Northern Rock-style banking crisis will be set out by Chancellor Alistair Darling today as he faces MPs over the summer’s financial instability.
He will use a Commons statement to set out plans to boost consumer confidence and prevent a repeat of the events that led to the first run on a UK bank for more than a century.
A consultation on a US-style law change to guarantee savings of up to £100,000 in the case of a bank collapse will be launched, in an attempt to avert further scenes of panic withdrawals by savers.
The Government increased the amount from £2,000 to £35,000 this month after thousands of investors joined giant queues outside Northern Rock branches to take out their cash.
Mr Darling will analyse the need for more effective schemes to give the UK an “early warning” of potential turbulence caused by issues in the United States economy.
The feared collapse of Northern Rock was triggered initially by the knock-on effects of problems in the US sub-prime mortgage market, involving loans to high-risk borrowers.
MPs will also demand to know how he will shake up the “tri-partite” system of overseeing the City by the Treasury, the Bank of England and the Financial Services Authority (FSA).
And there will be fresh calls for a shake-up of EU laws preventing the Bank intervening in secret - legislation its Governor Mervyn King blamed for worsening the Northern Rock situation.
The FSA has already conceded there were “serious lessons to be learned” over its monitoring of the sector, reviewed after the run on the bank.
The mortgage lender’s chief executive and chairman, Adam Applegarth and Matt Ridley, face a grilling by the Treasury select committee - which is also to question Mr Darling - next Tuesday.
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