Sweeping powers to intervene in failing banks are to be given to the Financial Services Authority as part of a regulatory shake-up by the Chancellor of the Exchequer, to avoid a repeat of the Northern Rock crisis. Financial Times, Daily Telegraph
The new measures would allow the FSA to seize and protect depositors’ cash when a bank gets into serious difficulty, heading off the risk of a run on the bank.
Mervyn King, governor of the Bank of England, believes a special insolvency regime for banks is vital because it would mean that a badly run bank could be allowed to fail without fear of a systemic crisis caused by a loss of public confidence.
The central bank has committed at least £25bn of taxpayer-backed loans to Northern Rock since savers began queuing around the block to withdraw their money last September.
Darling mapped out a wide-ranging response to the Northern Rock debacle, including measures that put the chancellor firmly in charge of dealing with any future banking crisis. 'I want to make sure our own legislation is up to the mark in dealing with problems when they arise in future,' he said. He will introduce legislation in May and will launch a consultation within the next few weeks.