Bonus for watchdog that failed the Rock

May 7 2008 by William Green, The Journal

Crisis compared to rescued US bank

BRITAIN’S financial watchdog yesterday admitted the crisis to hit Northern Rock was "comparable" to one that affected a US bank rescued within days.

The rescue of American bank Bear Stearns by rival JP Morgan was underwritten by US central bank, the Federal Reserve, to the tune of £29bn in March.

The UK Government has faced claims Northern Rock was left exposed because of "months of dithering" after hitting problems last autumn.

Ministers tried to find a private buyer but failed and nationalised the bank this year.

But the Financial Services Authority chairman Sir Callum McCarthy yesterday said there were comparisons between the situations that faced the two banks.

The admission came as he was grilled by the Commons Treasury committee about a possible sale of Northern Rock to Lloyds TSB before it hit trouble.

Sir Callum said: "I think there is comparable not exact parallels. But I do believe there are comparisons between the two, yes."

Chairman admits failings

THE chairman of the Financial Services Authority has conceded failing to "do the job" in monitoring Northern Rock – but denied it was because the bank is based outside London.

Sir Callum McCarthy made the admission after yesterday being challenged by the Commons Treasury select committee to explain why the watchdog had not visited the Newcastle-based lender more often in the years before its near collapse last autumn.

His comments came after an internal review by the Financial Services Authority (FSA) blamed part of the Rock’s troubles on it being based in the North East.

Newcastle Central MP Jim Cousins, part of the Commons Treasury committee, has said a London-centric system failed the region.

And Sir Callum was yesterday challenged by committee member Mark Todd, who said: "It has been mentioned how infrequent the visits were to Northern Rock. Anything to do with the fact that they are way out of London, up in the North East?"

Sir Callum said: "This was not because it involved people getting on a train or an aeroplane, it was because we didn’t do the job properly."