UK ‘gold-plating’ blamed for NRock crisis

UK rules on transparency were to blame for the Northern Rock bank run last month, according to European Commissioner, Colin McCreevy.

Giving a speech in Dublin, McCreevy blasted UK regulators for ‘gold-plating’ transparency rules, which led to investor panic and, ultimately, the first British bank run in over 150 years.

McCreevy says: “in recent weeks, gold-plated transparency rules stood in the way of the quiet resolution of a problem before it became a crisis. The result was that transparency rules that were intended to underpin investor confidence, when put to the test, actually promoted investor panic.

“Panic that culminated in a bank run-averted only by a central bank lifeboat which in turn spread moral hazard throughout the system.”

He said regulators would be wise to learn from the crisis and should adjust rules regarding transparency, saying it was often beneficial for issues affecting the stability of major financial institutions to be carried out behind closed doors.

The Conservatives have already called for the Government to look into gold-plating issues, saying a single page of EU law can often result in several pages of UK regulation.

Mervyn King, governor of the Bank of England, also criticised UK transparency rules at a Treasury Select Committee hearing, saying he would have preferred to make a loan to Northern Rock in secret.

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