Bank Of England governor Mervyn King has suggested that Banks should put ‘billions of pounds’ into a fund over the next ten years to prevent another Northern Rock disaster.
King told a meeting of the Commons Treasury select committee yesterday that banks should make “non-negligible contributions” into the Financial Services Compensation Scheme, adding that over ten years the fund would build up billions.
He added “I think it’s rather short-sighted that the banks shouldn’t put up money now, If you wait until there’s a problem, that’s a bad time to ask.”
King also suggested that the Bank Of England should have the power of deciding if a failing bank needed to be brought under the control of the authorities.
King said the central bank would have acted a lot sooner to save Northern Rock if the BoE had been given the power to use the proposed resolution scheme. “That bank would have been dealt with immediately,” he said. “We certainly would have handled it differently.”
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