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King wishes BoE had been given power to trigger special resolution regime

Bank of England governor Mervyn King has admitted he would have preferred that the Bank had been granted the power to pull the trigger for the special resolution regime as well as the FSA.

Speaking at the Treasury select committee this morning King said that the Bank would be allowed to make recommendations to the FSA over when to trigger the regime for a failing bank, but it would not make the final decision.

He said: “I would have preferred if we had the power to pull the trigger. The Treasury decided that was not a power that we would be given. We lost the argument.”

King also said that any recommendations the Bank makes about triggering the regime and the FSA decides not to follow may not be made public unless the struggling bank actually enters the regime.

King added that it would be a mistake to rush through banking reforms and that there was a lot of detail still to be discussed. He also said he was in favour of some form of risk-based pre-funding for the depositor protection scheme. He said that over ten years the fund should be in its billions.

Also speaking in front of the Treasury committee later this morning, economic secretary to the Treasury Kitty Ussher MP said: “I think it is entirely right that the members of the Tripartite authorities should be able to communicate in private.

“I also think it is entirely right that it is the responsibility of the FSA to decide when the threshold conditions are met so that it triggers placing an institution into the special resolution regime when capital adequacy and other conditions are not met.”

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