Are They Playing With Our Money

In the financial news the Chancellor, Alastair Darling, has announced a proposal aimed at preventing a “Northern Rock” style run on banks in the future.

The proposal seeks, amongst other things, to allow the Bank of England to rescue troubled banks in secret, providing emergency loan assistance for a specific period before requiring the rescue package to be made public.

Under the proposal announced today, this period of “non-disclosure” would be allowed to prevent an “adverse impact ” on consumer confidence.

‘Run’ Leaves Bank Vulnerable

Consumer bank Northern Rock saw panic at it’s doors a few months ago, when its business practices left it short of a few bob and it became a casualty of the “credit crunch”, caused by the US sub-prime mortgages issue.

It has recently sold it’s equity release portfolio in an attempt to stablise and get back the business banking as usual. The situation is said to be the first ‘run’ on a British Bank in 100 years.

Will Proposals Help

Here in the UK, our banks, the Bank of England and the Treasury have all sought to reassure the British public that the sub-prime mortgage problem will not affect our markets as badly as it has in the United States.

However I am not sure that all the announcements being made, the current stock market conditions, and the slowdown in the UK property market, coupled with the proposals announced today in the news will have the desired effect.

Our mistrust of government and the perception that it lacks transparency may only serve to reinforce the fear that the worst is yet to come and dent consumer bank confidence even more.

The proposal put together by HM Treasury, FSA and The Bank of England, will now enter a 12 week consultation period.

In the meantime, we’ll have to wait and see whether these proposals are a help or a hindrance to consumers and banks in need of assistance.

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