Bankers oppose new FSA powers
by Gill Montia
Story link: Bankers oppose new FSA powers
The Chancellor of the Exchequer’s plans to give additional powers to the Financial Services Authority (FSA) are likely to face opposition from bankers.
The proposals, which are due to be published this week, are aimed at preventing a reoccurrence of the conditions that caused last September’s run on Northern Rock.
They include giving the FSA fresh powers to intervene with failing banks and to seize customers’ deposits in the event of a crisis.
A consultation paper will also outline plans to increase the guarantee for savers’ deposits.
While the changes are expected to be broadly welcomed by the financial industry, including the British Bankers’ Association, some bankers are nervous about the extent of the new measures, particularly as it is understood that the FSA would be able to “ring fence” retail savers’ accounts if it considers that a bank is in crisis.
According to banking experts, this could mean that banks would be less willing to lend to a bank, if they believe there is a danger of its retail deposits being seized.
It has also been pointed out that under the new proposals, Northern Rock’s difficulties could have been far worse.
Northern Rock had to borrow from the Bank of England to make up for the money its customers withdrew and if the FSA had seized all the deposits instantly, the mortgage bank’s situation could have been made even less tenable than it is.
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