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The Treasure Committe's Fifth Report of Session 2007-2008.
The report analyses the causes and consequences of the run on Northern Rock, and the lessons to be learnt from it.
The directors of Northern Rock were the principal authors of the difficulties that the company has faced since August 2007, the report states. The directors pursued a reckless business model which was excessively reliant on wholesale funding. The Financial Services Authority systematically failed in its regulatory duty to ensure that Northern Rock would not pose a systemic risk.
The report concludes that there was a significant failure of the Tripartite arrangements in September 2007.
A single authority ought to be given the new powers for handling failing banks, together with responsibility for the Deposit Protection Fund. There is a need for ‘creative tension’ within the regulatory system, and so these powers and responsibilities should not be granted to the Financial Services Authority.