Sunday, September 16, 2007

Bank’s credibility on the line

Bail-out that will damage Bank’s credibility

The Northern Rock bail-out was formally a joint decision of the UK Treasury, the Financial Services Authority and the Bank of England. However, their Memorandum of Understanding (MOU) states that “ultimate responsibility for authorisation of support operations in exceptional circumstances rests with the chancellor [of the exchequer]”. This makes sense: the taxpayer is on the hook when public resources are put at risk. Unfortunately, it is the Bank’s reputation that is damaged. It had to provide credit after the governor took a strong public stand against bail-outs.

Posted by ash4781 @ 07:31 PM (467 views)
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