LONDON – The UK Treasury, the Bank of England and the Financial Services Authority have released the proposals of their joint consultation paper, Financial stability and depositor protection: strengthening the framework, to address the failings that led to the run on Northern Rock.
The three authorities – making up the UK’s tripartite system for banking supervision – have been dogged by criticism and political infighting over their handling of last year’s run on the Newcastle-based lender. The document represents a joint attempt to address the failings of the tripartite system as a whole.
The proposals include five key actions aimed at addressing financial instability in the UK and internationally: reducing the likelihood of banks facing difficulties; the impact of the difficulties should they occur; providing effective compensation to instill consumer confidence; strengthening the Bank of England; and improving coordination between UK and international authorities.
“The government is determined that its response is proportionate and appropriate, and will therefore consult actively on these proposals, seeking discussions with financial institutions, consumer representatives and counterparts from across the world to ensure the final arrangements are effective and deliver the five objectives set out here,” said the UK’s finance minister Alastair Darling.
Darling stated that the Treasury Joint Committee’s report released on January 26 had informed the proposals. On January 30, after parliamentary pressure, the government also extended Mervyn King’s stay as governor of the Bank of England for another five-year term.
The deadline for comments on the consultation document is April 23, 2008.