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Opinion

How not to stop a Rock rolling

The prevention of re-runs of the Northern Rock catastrophe depends on something better than the duplication of an existing regulatory committee.

The Rock is not an island

Proposals put forward by the chancellor of the exchequer to help the UK better deal with another incident like the implosion of Northern Rock look to be a knee-jerk reaction by politicians wishing to be seen doing something to solve a problem.

Although some proposals, such as increasing the proportion of deposits safeguarded by the deposit guarantee scheme, are useful, others, such as the creation of an emergency committee of the Bank of England, Financial Services Authority and the Treasury, to be led by the chancellor and touted as an equivalent of the government's Cobra committee, which coordinates responses to civil emergencies, look like pointless duplication.

Although the tripartite regulators' handling of the crisis has left much to be desired, their failings arguably lie not so much in a lack of adequate powers, which the chancellor himself concedes, or in a lack of committees, or clear authority, as in a lack of awareness of existing powers and in a lack of contingency planning.

The Banking Act already gives the Bank of England draconian powers to seize control of troubled institutions and an existing tripartite committee is already chaired by the treasury.

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