Darling promises action to deal with future Northern Rocks

30-01-2008

Darling promises action to deal with future Northern Rocks
The chancellor has unveiled a raft of new proposals to make it easier for banking authorities to take over banks.

Launching a consultation on proposals for "strengthening the current framework for financial stability and protecting depositors", Alistair Darling said action was required.

The measures outlined will enable the Bank of England, Treasury and Financial Services Authority (FSA) to work together to take over a failing bank, in a bid to prevent a repeat of last year's run on Northern Rock.

The government's consultation process will last until April 23rd, with plans put forward including the provision to part-nationalise institutions in times of crisis.

Among the plans is the introduction of a 'special resolution regime' which would contain a "range of tools to resolve a failing bank in a more orderly manner".

This would allow an "accelerated method to transfer its business to a healthy bank, a 'bridge bank', deployment of a restructuring officer and a bespoke 'bank insolvency procedure'", the government says.

Mr Darling claims the plans will help achieve five key objectives: strengthening the stability of the British and global financial system; reducing the likelihood of banks facing difficulties; reducing the impact if they do; providing effective compensation arrangements to inspire consumer confidence; and strengthening the Bank of England and relevant authorities.

"Recent months have seen a period of sustained turbulence and instability in global financial markets, with financial firms across the world affected," the chancellor said.

"A response to these episodes requires action, not only from the UK authorities, but also from international firms and institutions."
The government insists that it will "consult actively" on the proposals and seek opinions from "financial institutions, consumer representatives and counterparts from across the world".

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