The City watchdog has laid out plans to allow banks to tap the Bank of England for emergency funding without informing the market, in a move which might avoid a repeat of the run on the bank which led to the collapse of Northern Rock. Under the European Union’s market abuse directive, regulated firms have to disclose price sensitive information. However, the Financial Services Authority yesterday said there were potentially situations where banks would be allowed to keep it secret if they had applied to the Bank. The main case for an exception would be if disclosure could panic investors and lead to fears for a bank’s solvency, the regulator said. The FSA laid out a series of proposals in a consultation document. It invited industry groups to respond by September 30.
Critics may say the move comes too late. The Government has been attacked over Northern Rock, which, following a leak, confirmed to the stock market in September that it had appealed to the Bank for emergency funding. The announcement prompted thousands of its customers to queue to withdraw their money, and led to a plunge in the bank’s share price. The Bank was forced to lend billions of pounds to Northern Rock before it was nationalised in February. More
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