FSA chiefs to explain actions over Norther Rock
by Gill Montia
Story link: FSA chiefs to explain actions over Norther Rock
The chief executive and chairman of the Financial Services Authority (FSA) are to explain their part in the Northern Rock crisis to a Treasury Select Committee.
When Mervyn King, the Bank of England’s governor, faced MP’s over the near collapse of the bank it was clear that he could not identify which branch of government had prime responsibility in the situation: the Treasury, the Bank or the FSA.
The situation has yet to be clarified but Sir Callum McCarthy, the FSA’s chairman, and Hector Sants, its chief executive, are likely to have to explain why the FSA eased the capital requirements on Northern Rock, in June.
This enabled the bank to continue to lend to new customers, even though it was in difficulties with the financing of the business.
The Authority and the Bank of England have also been criticised for apparently not having a plan in place to deal with a run on a retail bank.
This could lead to further probing on the relationship between the two institutions and the extent to which they are in dialogue.
The conflicting cultures of the FSA and Bank of England have been pointed out by some commentators as an issue.
Their locations may reflect on this; the FSA is based in the modern environment of Canary Wharf while the Bank of England occupies its historic site on Threadneedle Street.
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