Bank of England 'warned of regulatory weakness'

3 March 2011

The governor of the Bank of England (BoE) has claimed that senior bosses at the central bank attempted to warn the former UK government and Financial Services Authority of regulatory shortfalls before the 2008 crisis.

According to FT Adviser, Mervyn King told MPs at a hearing of the Treasury Select Committee this week that the BoE had proposed setting up a resolution regime prior to the collapse of Northern Rock over three years ago.

"[A statutory resolution regime] was not available at the time of Northern Rock and was the single most important impediment to dealing with that problem," he explained, asserting that such an arrangement would have solved the crisis "over a weekend".

Mr King went on to claim that the UK financial sector's restructured regulatory arrangements were the strongest in the world and suggested lawmakers were in a position to handle any events similar to Northern Rock's failure.

In 2007, the lender became the first British financial institution in 150 years to experience a bank run from customers and was subsequently taken into public ownership the following year.

By Asim Shah

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