Northern Rock
'Rock bosses will not face inquiry'
CALLS for an investigation into
the conduct of Northern Rock's
directors are expected to be rejected
today by the Financial Services
Authority (FSA).
The city watchdog is due to release
an internal report into the
crisis that led to the first run on
a British bank for more than a
century and ended with the nationalisation that the UK is facing prolonged
economic misery from the impact
of the credit crunch.
It said the effect of tighter lending
conditions on households
and business "was yet to be fully
felt" as it cut growth estimates
for this year and next.
Its latest quarterly forecasts
now predict UK growth of 1.8 per
cent this year, weakening to 1.7
per cent next year.
The increasing pessimism contrasts
with its previous expectations
of two per cent growth this
year and 2.1 per cent next year.
The CBI said: "The process of
credit tightening will act as a
drag on real activity, thus prolonging
the slowdown into 2009."
It said the credit crunch has
also magnified the effect of five
interest rate rises in the run-up
to July last year, intended to cool
the UK's soaring growth and ease
inflation.
Chief economic advisor Ian
McCafferty said UK firms were in
relative health after strong profits
in recent years, but if banks'
access to cash remained constrained,
the impact was "as
much a 2009 story as one for
2008".
He said: "Rather than being a
short, sharp shock that would
drive the UK economy close to, or
into, recession in the near future,
it is better thought of as a longerterm
headwind that will hold
back any recovery until well into
2009, and limit the potential pace
of growth of the economy for
some time thereafter."
The CBI also warned that the
squeeze on consumer spending
would be sustained for much of
this year.
It said disposable income
would be under pressure from
soaring energy and food prices,
while wage settlements and earnings
were not expected to rise in
response.
of the Newcastlebased
lender.
It will criticise Northern Rock
executives for relying on international
money markets to raise
finance, despite warnings of a
credit crunch, according to a report
in a national newspaper.
The FSA will also admit to a series
of errors in its regulation of
Northern Rock, but will argue for
banks to be monitored more
closely in the future rather than
focusing on the past conduct of
the bank's directors.
An investigation into the sale
of company shares in the 18
months before the bank's collapse
is also expected to be ruled
out, the FSA adds.
The Northern Echo previously
reported that four of the fiveman
board made more than
£6.5m from share sales, according
to figures released by the
London Stock Exchange.
At the time, North Durham MP
Kevan Jones said: "There is nothing
illegal about this. The directors
have the right to sell shares,
but they sold them at the height
of the price and a lot of people
have lost money over this."
Instead, the FSA is expected to
ask for 100 more supervisory
staff to carry out in-depth monitoring
of bank activities in an attempt
to avoid another Northern
Rock-style crisis.
The Guardian newspaper said
this would equate to one supervisor
for each of the 100 biggest
"high category" institutions
monitored, which would include
the UK's largest retail and investment
banks.
Northern Rock's troubles
began last September, when it
was forced to seek emergency
funding from the Bank of England,
because the crisis in US
sub-prime mortgage lending led
to money markets drying up.
Meanwhile, the CBI is warning
7:59am Tuesday 25th March 2008
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CommentPosted by: Jack, Exeter on 9:15am Tue 25 Mar 08
Did anyone seriously think that Gordon Brown's friend, Sir Derek Wanless (Head of Risk at Northern Rock) would be investigated !
Did anyone seriously think that Gordon Brown's friend, Sir Derek Wanless (Head of Risk at Northern Rock) would be investigated !
Posted by: Jack, Exeter on 9:22am Tue 25 Mar 08
Wanless' 2002 NHS Report was Brown's 'intellectual justification' for raising over £45 billion in taxes. To admit that Wanless was culpable in the costly mess at Northern Rock, would cause far too many red faces in Whitehall.
Wanless' 2002 NHS Report was Brown's 'intellectual justification' for raising over £45 billion in taxes. To admit that Wanless was culpable in the costly mess at Northern Rock, would cause far too many red faces in Whitehall.
Posted by: Charles, Darlington on 4:15pm Tue 25 Mar 08
To be expected! Luckily though it will save us all the cost of an investigation that would have found no blame anyway.
To be expected! Luckily though it will save us all the cost of an investigation that would have found no blame anyway.
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