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Just a few days ago the main powerhouses behind the EU met to discuss a joint effort to bolster the European economy and pull the EU from the brink of financial collapse. They all shook hands,...
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Tuesday 22nd July 2008
Mervyn King, the governor of the Bank of England, has turned up the heat on the UK’s leading banks by suggesting that they should start contributing to a new compensation fund now, rather than after the event. The new compensation fund will be used to fund any similar scenarios to the Northern Rock debacle and it is hoped it will instil confidence back into the sector.
However, one sticking point seems to be the funding arrangements which currently see the FSA going cap in hand to the banks for compensation finance in the event of problems in the sector. Mervyn King believes that it would be more appropriate for the banks to start contributing to the scheme now, thereby ensuring that there is no last minute panic if the need to use the scheme arose.
He has also suggested that covert funding operations should be allowed as he firmly believes that the Northern Rock scenario would have been so much different if delays had been removed from the system. In a clever public relations exercise he cleverly tried to pass much of the blame for Northern Rock to the government and the FSA, claiming that if the Bank’s hands had not been tied the nationalisation route would not have been required. |
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