Mervyn King has told MPs he would have liked the ability to trigger the special resolution regime to rescue the failing Northern Rock.
Under the Treasury’s Tripartite regime only the FSA has the power to initiate the special resolution to help a failing bank, King told the Treasury Select Committee.
The Bank of England can recommend using the regime to the FSA, but only the latter can actually trigger the regime.
King says the Bank of England should be able to intervene when banks are in trouble, while the FSA should manage individual institutions during ‘peacetime’.
King says new banking resolutions, currently debated in Parliament and by the Government, should not be rushed and it would be important to get the details right than attempt to complete the legislation by its timetabled date in late February.
King also recommended creating a financial stability committee with both executive and non-executive members to discuss and act on issues of financial stability in a similar manner to how the monetary policy committee deals with controlling inflation.
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