FSA responds to accusations over Northern Rock
December 17, 2007
The Financial Services Authority has been accused, along with other financial regulatory bodies, of not doing enough to prevent the recent chaos at Northern Rock, which became the victim of the first run on a UK bank in nearly 150 years.
The Financial Services Authority was set up seven years ago, and one of its responsibilities is the policing of banks. Experts state that the FSA now faces its biggest test since it was set up.
Officials from the FSA have stated that the full details of the Northern Rock crisis would not be clear until next year, but added that a panic response to the situation would damage the regulatory system in the UK. Northern Rock enjoyed a reputation as the nation’s fifth largest mortgage lender until the chaos took hold in September.
When it became widely known that the bank had approached the Bank of England for an emergency loan, many consumers panicked thinking the bank was on the verge of collapse and quickly withdrew billions of pounds over the space of a few days.
A spokesman from the Financial Services Authority stated: “One has to be cautious about rushing off after turbulence or a crisis to suggest legislative change. We’ve had, in this country, the Dangerous Dogs Act and, in the United States, Sarbanes-Oxley. There is ample evidence that legislation made in haste can create significant harm. One certainly needs to draw lessons but one shouldn’t rush.”
Since the Northern Rock incident a number of changes have been put into force in the UK, including an increase in the level of savings that the government will guarantee in order to try and stop this sort of situation from arising again in the future.
17th December 2007
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