Chancellor's solution will not solve Northern Rock problem says Cable

9.30.00am UTC (GMT +0000) Mon 7th Jan 2008

Northern Rock

The chancellor is planning to give the Financial Services Authority more power to deal with failing banks to avoid another Northern Rock-style crisis. The proposals, planned for legislation in May, include giving the FSA the power to seize and protect customers' cash if their bank was to get into difficulties. The Chancellor has ruled out having a special institution designed to take over banks that get into trouble, as happens in the US, but wants to introduce a new Cobra-style response unit to deal with any future financial crises.

Liberal Democrat Shadow Chancellor Vince Cable "It is obviously sensible for the Government to think carefully about how to avoid future runs on banks, but it still hasn't found a satisfactory solution to the Northern Rock problem. What is missing from the Government's approach is some indication that it understands the need to prevent our liberalised banking system from repeatedly running into the same problems as Northern Rock. This is the loud slamming of stable doors after the horse has bolted."