Gordon Brown must take a major slice of the blame for the Northern Rock crisis one of the Prime Minister’s previous appointees to the Bank of England will claim today. Daily Telegraph, Independent
In his appearance before the Treasury Select Committee, leading economist and former Monetary Policy Committee member Willem Buiter will blame Mr Brown’s decision to hive off the key regulation role from the Bank to the Financial Services Authority for creating the foundations for Northern Rock’s downfall.
He will call for the Bank of England to be reinstated as the chief banking supervisor and regulator, and argue that the MPC should be made independent of the Bank.
Meanwhile, a new rescue plan for Northern Rock has been welcomed by investors, despite meeting with immediate scepticism among banking analysts. Shares rose almost 6.5% to 154.4p last night after Olivant, the independent investment group led by the former Abbey chief executive Luqman Arnold, confirmed it planned to submit proposals for a restructuring of the company.
Norhern Rock has asked an expert in competition law to consider whether the bank could get around strict European rules on state aid so government funding could continue beyond March.
It has asked Andrew Renshaw, a Brussels-based partner at Freshfields Bruckhaus Deringer, to consider the issue. Northern Rock has borrowed at least £20bn from the Bank of England since September and is likely to fall considerably further into debt by the end of the year.