(1888PressRelease)
September 25, 2007 - Mervyn King, the governor of the Bank of England, has suggested in an appearance in front of a Treasury Select Committee that his Northern Rock rescue mission would have been carried out in a different fashion were it not for EU and UK laws.
According to Mr King, four unconnected legislative measures have acted to 'hem' the Bank in and prevent it from acting as an effective "lender of last resort".
Specifically, UK company laws prohibited Mr King from organising a sale of Northern Rock, while an EU banking law passed in 2005 deems it necessary for authorities to announce if a loan has been made to a bank.
The latter law had particularly damning implications, as it sparked widespread unrest among the general public.
"In the 1990s, the Bank of England might have dealt with the situation by acting covertly as the lender of last resort, without publishing it until after the process had finished," Mr King told the committee.
Mr King's role in the affair came under scrutiny after he announced measures earlier this week to pump the capital markets with £10 billion of three-month money.
He had previously said that injecting liquidity would "encourage excessive risk-taking and sows the seeds of a future financial crisis".
Further analysis of the EU banking system could be supplied by Aranca, an end-to-end provider of on-demand, custom investment, business and economic research.
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