Financial Services Authority
The Run on The Rock
HC 56-I, Fifth Report of Session 2007-08 – Volume I: Report, Together with Formal Minutes
- House of Commons – Treasury Committee
- TSO (The Stationery Office)
'The Run on The Rock (HC 56-I)' examines the first run on the retail deposits of a United Kingdom bank since Victorian times and analyses the causes and the consequences of the run on Northern Rock and what lessons can be learned. The report states that the directors of Northern Rock were the principal authors of the difficulties that the company faced since August 2007 and that the directors had pursued a reckless business model which was excessively reliant on wholesale funding.
The Committee believes that the Financial Services Authority systematically failed in its regulatory duty and that the Chancellor of the Exchequer was right to view Northern Rock as posing a systemic risk to the financial system and to authorise the Bank of England's support.
Conclusions and recommendations include:
A series of measures for handling failing banks in an orderly manner to insulate taxpayers and small depositors should be introduced.
A relevant authority should be given power to acquire information relating to individual financial institutions and take action in specified circumstances.
A special resolution regime should be established for failing banks to enable smooth administration of the bank. This should be combined with arrangements ensuring insured deposits are safe and accessible.
A Deposit Protection Fund should be set up that will ensure easy release of funds under any scheme.
A new post of Deputy Governor of the Bank of England and Head of Financial Stability should be created with responsibility for handling failing banks and the proposed Deposit Protection Fund.
The accompanying 'The Run on The Rock - Volume II: Oral and Written Evidence (HC 56-II)' (ISBN 0215513371) is available to buy separately, see below.
|Format||Paperback||Published||26 Jan 2008|
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