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Treasury report admits it was not ready for financial crisis

The Treasury did not see the financial crisis coming and was unprepared to deal with it as a result, an official report has revealed. 

An internal review into the response of the department’s management to the crisis admits that before 2007 financial services and stability were not “high profile” issues for the department.

It says although resources were ramped up to deal with the crisis, this should have been done more quickly. Only three staff were working directly on financial stability before the run on Northern Rock in August 2007. This figure rose to over 100 in July 2009. The full size of the team including lawyers and advisers peaked at around 200 in the summer of that year.

It says: “The Treasury, like many other institutions, did not see the crisis coming and was consequently under-resourced when it began.

“Overall, the Treasury was stretched and could have been better prepared.”

It quotes a senior Treasury official as saying: “In retrospect, we did not gear up nearly enough. We should have had five teams and 100 people, not two teams with 30.”

The review says the team put together after the collapse of Northern Rock had few members with banking experience and the majority had to “learn on the job”. It adds that although the Treasuy’s financial stability team will be protected as the department’s budget declines, retaining the now experienced team will be a “challenge”. The Treasury has been struggling to retain staff and the review recommends the department “develops a strategy to manage its turnover rate and sets an annual turnover target of 15 to 20 per cent”.

The report praises reorganisation within the Treasury since 2010 saying there has been “serious efforts” to improve the department’s civil service leadership and that the working practice is now “more flexible and less-siloed”.

It says: “The Treasury has much greater capability in the financial sector and on crisis management than it had before and in the early stages of the crisis.”



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There are 3 comments at the moment, we would love to hear your opinion too.

  1. When the FSA said something similar it got ripped apart, nice to see a level of balance from us advisers eh?

  2. Perhaps the Treasury believed Gordon Brown when he said he had abolished boom and bust, how short sighted of them.

  3. So, without actually spelling it out, is the Treasury now admitting that it ignored warnings from a number of respected individuals that BIG trouble was brewing? Or that it was wrong to instruct the FSA to focus its resources on regulating everything but the banks? Or that the FSA was completely under-resourced to regulate the banks anyway?

    Would it have made any difference at all even if Hector Sants had “shouted a little louder”?

    It was interesting to read a few weeks ago (in another publication) that in the US, a significant number of large private corporations are now considered widely to represent better credit bets even than the government. One wonders if a similar state of affairs now pertains in the UK.

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