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King lost battle for dual control to rescue banks

Bank of England governor Mervyn King believes the bank should be given the power as well as the FSA to trigger measures that would try to save a failing bank in the future.

Speaking at the Treasury select committee this week, King told MPs he believed it was wrong that only the FSA will have the power to launch emergency measures as part of the proposed special resolution regime.

King said: “I would have preferred it if we had power to pull the trigger. We lost the argument.”

Committee chairman John McFall said he felt “slighted” by the Treasury’s decision to publish the SRR consulta- tion this week, giving the committee little time to scrutinise it before reporting in September.

The committee also attacked proposals for the financial stability committee to be chaired by King, asking how he could hold the tripartite authorities to account.

King responded by saying the directors of the FSC would be accountable to the Court of the Bank of England, which has non-executive directors, and would also be accountable to the TSC.

He expressed support for a risk-based pre-funding of the depositor protection scheme and said it was “short-sighted” not to take this route.

Treasury economic secretary Kitty Ussher told MPs that she was satisfied that UK investors in foreign banks were adequately protected against institutions failing but added: “I do not want to be pressed too far on this issue as I do not want to cause undue alarm.”

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