King Admits Bank Solvency Liquidity Fears

Bank Solvency

It has been admitted by Bank of England governor Mervyn King, the Financial Services Authority (FSA) and the Treasury that they knew in 2006 they could not deal with solvency failings of a UK bank.  

The Tripartite Authorities agreed in 2006 that the issue was “urgent” and would be a “key part of its future work programme”.  

King has told MP’s that a liquidity and solvency testing regime would help guard against future problems and the Financial Services Authority (FSA) will be publishing a liquidity discussion paper.

Our view

Over a year later, work on this urgent matter has only just begun with King admitting that the three parties had not known the issue would need to be addressed so quickly as it has had to be now with the Northern Rock fiasco.  A travesty given the then known ‘credit crunch’ problems in the United States.

It would appear that the FSA is now to be granted greater powers to monitor and intervene where Bank solvency margins are in question.  What this space.

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