Chancellor moves to prevent Rock repeat
CHANCELLOR Alistair Darling will attempt to head off a repeat of the Northern Rock crisis by unveiling plans to beef up banking supervision today.
Mr Darling is set to launch a three-month consultation on proposals likely to give the Financial Services Authority (FSA) more power to ensure banks have enough liquidity to keep going.
The proposals put forward could include FSA powers to remove depositors’ cash from at-risk banks under a special insolvency regime, as well bolstering the Bank of England’s role in ensuring financial stability.
But Alastair Thomson, chair of the Institute of Directors in the Tees Valley, believes the real problems for Northern Rock laid elsewhere.
“Banks get into trouble from time to time, and the problem wasn’t the situation that Northern Rock found itself in, but that there was no established mechanism for getting them out of it,” he said.
“It is the structure of financial regulation that needs to be looked at - everyone including the Bank of England, the FSA and Government was vaguely responsible, but nobody’s name was in the frame - that to me is the problem that needs to be solved.”
The consultation follows a discussion document on protecting savers launched by Mr Darling last October - weeks after news of Northern Rock’s funding bailout sparked the UK’s first bank run in more than 140 years.
The first £35,000 of savers’ deposits are guaranteed under the current deposit protection scheme.
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