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MP says BoE evidence “did not stand up” in hindsight

Treasury select committee MP Jim Cousins said Bank of England governor Mervyn King’s evidence to the committee in advance of Lehman’s collapse did not stand up in hindsight.

Speaking at an evidence session this morning on accounting standards and the banking crisis, Labour MP Jim Cousins questioned how a member of the public investing via an institution could be expected to understand how secure it was when even the Bank of England’s own governor was not able to predict Lehmans’ collapse.

Cousins said: “On September the 11th the Governor of the bank of England came here … and made a long statement to us.

“Four days later Lehman Brothers collapsed in a puff of smoke. What the Governor of the Bank of England had said to us didn’t stand up anymore.”

He added: “If the Governor of the Bank of England cannot read the rumbles how can some poor woman who is relying on the proper investment of her divorce settlement to see her through the rest of her life?”

Cousins accused the British Bankers’ Association of trying to water down fair value accounting rules in order to use more subjective valuations of assets, but he said the public would not be prepared to trust the industry’s “little box of tricks”.

The BBA’s executive director of financial policy and operations Paul Chisnall said he was not calling for a “box of tricks”.

He said: “What we are saying is that fair value is relevant and appropriate in certain circumstances and it is not relevant in certain circumstances.”

The Association of British Insurers director general Stephen Haddrill said that there was a danger that in when markets for certain assets are frozen it is difficult to provide fair value assessments and so valuations become more subjective.

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