After Northern Rock collapsed it was obvious that something needed to be done to stabilize things. New powers were granted to the Bank of England on a temporary basis.
Since then things have gotten worse in the financial world and now these laws have been made permanent in an attempt to help manage the state of flux we are in.
According to an article on the BBC website the new legislation has received mixed reactions. On the face it seems to be a very good thing for the majority of us. If nothing else it allows for savers to receive compensation within one week if a bank is to go bust.
I know that would be a huge relief to many savers, some of whom ended up in the frightening position of not having enough funds to cover their outgoings while they waited for previous disasters to be addressed.
The major objective though is to try to make things a little more stable and to therefore increase confidence.
Peter Thal-Larsen, banking editor of the Financial Times, told the BBC’s Working Lunch programme “The idea is that, if there is a bank that gets into trouble, to insulate it and make the wider impact of that less”.
It remains to be seen if this will work but is an admirable goal so what exactly is the problem?
The difficulty lies with the fact that the Bank of England will be allowed to hide the support they give any banks. Obviously this is to prevent a loss of confidence of the type that added to Northern Rock’s demise but many simply do not like the lack of transparency.
This exemption from the Freedom of Information act has some people very concerned and I can see why but it is a tricky one. I can also see why it might be necessary.
