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Rolling with the Rock

Once upon a time, a chief executive who presided over a crash in share price following a run on his bank and a humiliating request for funds from the Bank of England would have resigned. A Chancellor who oversaw a run on a bank would have resigned. A Bank of England governor who failed to anticipate the crisis would have departed.

We think a call by Edeus chief executive Michael Bolton for Darling to go makes sense but it will fall on deaf ears.

Darling’s move to reassure savers that 100 per cent of their savings will be protected in future is in marked contrast to his tenure as Pensions Secretary when many of the problems with occupational pensions were becoming visible. It is just that damage to pensions is slow damage to pensioners and to the economic system. Occupational pensioners despite Government advice to stay in their schemes can be treated outrageously when savers who queue are not.

Bank of England governor Mervyn King made a convincing case in his defence before MPs last week. A great deal of legislation hampers his ability to manage things quietly while much of the bank’s former supervisory role rests with the FSA.

The FSA has a case to answer but we need more information before anyone issues a damning indictment of Callum McCarthy or any of his staff. But where the FSA may have fallen down and where the Northern Rock chief executive definitely does is in a lack of disaster planning.

Northern Rock was not unique in its model but because it continued to take deposits, its approach to mortgage funding left savers exposed. It is in a different bracket to firms which took deposits but had a mix of funding streams or those which simply specialise in mortgages where business failure risks much less consumer detriment.

Northern Rock needed a plan B or a better spread of funding, even if it meant sacrificing some of that much vaunted efficiency.

It had no such thing. Once they either manage a sale or get the business back on its feet, chief executive Adam Applegarth and his board should go.


The special ones

Those of you who have talked football with me know that I support Partick Thistle. Some years ago we found ourselves intertwined with the ubiquitous Ken Bates. Luckily, we escaped but for some time we had the services of the Chelsea reserves as and when needed. As such, I have to admit to an interest in the Blues and this week’s management change caught my attention, briefly supplanting the Northern Rock issue.

FSA sends out liquidity questionnaire to firms in light of credit crunch

The FSA has confirmed it has sent out liquidity questionnaires to banks and building societies asking for details of how they plan to fund future mortgage commitments following the Northern Rock crisis.Industry experts previously warned in Money Marketing that the panic over Northern Rock could result in the Government placing limits on how much funding […]

Bonds going bust? Not so fast….

In recent months bond bears have been reinvigorated, and market commentary suggesting “the end of the bond (bull) market is near” has become commonplace. We think these comments are premature. Explaining the global government bond sell-off October has seen renewed pressure on global government bonds, initially provoked by a Bloomberg article suggesting that the ECB […]


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