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Regulatory framework needs to be scrutinised, says BBA

Reform of the Financial Services Compensation Scheme must not distract policymakers from learning the real lessons of the Northern Rock affair, according to the British Bankers’ Association.

BBA chief executive Angela Knight says the Bank of England’s role in the markets, the amount of day-to-day money banks need to hold and the working of the Lender of Last Resort process all need to be scrutinised before further policy changes are made.

She adds: “Financial firms need to be involved at the earliest stage in these discussions. The more practical experience is embodied in these policy changes, the better they will work in the real world. We stand ready to work with the regulators to review and if necessary reform.

“It is much easier for the regulatory authorities to tackle the limits on the Financial Services Compensation Scheme than to focus on the questions that need urgent answers. No saver in Northern Rock came close to needing the Scheme, and ours remains one of the most generous in Europe. We still need urgently to understand why our regulatory framework did not break the chain of events which resulted in such dramatic scenes outside branches of a British bank.”

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