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"UK financial watchdog to get more powers"

By admin | January 14th, 2008 | General

The UK’s financial watchdog and regulator, the Financial Services Authority, is to be granted greater powers by the Chancellor of the Exchequer Alistair Darling in a bid to help avoid another Northern Rock style crisis in the future. According to recent reports Darling plans to give the FSA the power to seize customers’ cash in a bid to protect it in the event that their bank gets into severe difficulties.

Northern Rock became the first victim of a run on a British bank in nearly 150 years last year, with customers taking out over £2 billion worth of savings in the space of a few days after it emerged that the bank had taken an emergency loan from the Bank of England. Share prices plummeted and the banks – which had been the fifth largest mortgage lender in the nation – fell into serious difficulties.

The FSA is also to be given the power to make sure that banks have enough cash to conduct day to day business. Legislation relating to these increased FSA powers is likely to be introduced in May after a consultation period has taken place. Darling has dismissed the idea of having a specialist unit to take over ailing banks, as is the process in the United States. Darling said that he plans to make changes to the current tripartite system following the system failure with Northern Rock.

A senior official from the British Bankers’ Association said that she welcomed the move by the chancellor, stating: “Early intervention has to be right when a financial institution gets into difficulty. These are technical areas and we have to get them right.”

Tags: Bank of england, fsa, northern rock

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