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Warning against rushed banking reform

The Government risks damaging the UK’s financial services sector if it hurries through regulatory changes in response to the Northern Rock crisis, the Director-General of the Confederation of British Industry (CBI) warned this week.

Richard Lambert urged the authorities to learn from America’s damaging experience of the Sarbanes Oxley laws that were pushed through after the collapse of Enron, and warned that “we could be about to make the same mistake”.

Mr Lambert said: “The institutional changes proposed are very significant in scale, and represent a once in a decade chance to get on to the front foot. We are going to need a bit more time to get this right. If we get the answers wrong, the long-term impact of Northern Rock will be very serious. But if we get them right, the UK has the capacity to emerge from all this actually strengthened by the experience.”

Newcastle-based Northern Rock hit trouble last year as it was ill-prepared for the credit crunch emerging from the US financial market. The bank was nationalised last month, with all shares in Northern Rock handed over to the Treasury.

Mr Lambert described the credit crunch as a “perfect storm” that stemmed from several factors. He also stressed that shareholders have been the biggest victims so far, and that “UK taxpayers have not yet lost a penny”, adding that it is simply not true that “the financial system has succeeded in privatising its profits and socialising its losses”.

This was posted in Bdaily's Members' News section by Ruth Mitchell .