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MPs throw the spotlight on FSA over Northern Rock saga

The FSA and Treasury are to be hauled in front of the Treasury select committee to explain their role in the Northern Rock fiasco as MPs turn up the heat on the regulator.

FSA chairman Callum McCarthy and chief executive Hector Sants will appear in front of the committee on October 9 with MPs expected to take evidence from the Treasury at a later date.

The committee was originally planning to take evidence from McCarthy and Sants on this date as part of its annual scrutiny of the regulator’s report and the session may include questions relating to its annual report and the wider work of the regulator.

Bank of England governor Mervyn King faced a grilling from MPs yesterday with committee vice-chairman and Tory MP Michael Fallon also using the session to attack the FSA’s handling of the affair.

After the session Fallon said McCarthy now has “arguido status”- referring to the Portuguese police’s use of official suspect status in the Madeleine McCann case.

In his Mansion House speech last night, McCarthy said the events of the last week had been “sobering” and the FSA needs to reflect and then act to prevent a repeat.

McCarthy said: “I am conscious that those who queued last weekend will have questions about what happened, and why, which need to be answered.”

He said there were “long-standing components” of current arrangements that need to be re-examined, such as the compensation scheme arrangements for depositors.

He stressed that the current problems of liquidity and confidence are set against an economic background which remains benign and that the main banks are well capitalised and in a good position to withstand market pressures.

He said the events around the current credit crunch have moved the industry from one abnormal state of affairs- too little risk aversion- to another abnormal state- too much.

McCarthy said: “My Lord Mayor, these are not easy times. But it is a source of reassurance to see you presiding over this occasion, a reminder that the City has seen and has seen through other times of turbulence, and a source of the confidence which we need to reinforce in present circumstances.”


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