Chancellor outlines Northern Rock response

Posted on 4 January 2008 by Charcol

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The Financial Services Authority (FSA) is to be given more power to intervene in failing banks, as part of the Treasury's longer-term response to the Northern Rock crisis.

The government regulator is at the centre of a shake-up, proposed by Chancellor Alistair Darling, that would give the FSA powers to seize and protect depositors' money, preventing a run of worried customers trying to withdraw funds.

Mr Darling has proposed a number of triggers for such an intervention, including when a bank requests emergency Bank of England funds, as Northern Rock did in September.

The chancellor outlined his plans, which include elements of US, Canadian and Belgian banking insolvency regimes, in an interview with the Financial Times.

The British Bankers' Association has welcomed the proposals, which it says reflect recommendations made by the industry. Speaking to the BBC, spokesperson Angela Knight said: "Early intervention has to be right when a financial institution gets into difficulty."

"These are technical areas and we have to get them right."

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