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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.

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