Gordon Brown today offered Government help to homeowners with mortgage difficulties, while Banks and mortgage lenders face more Government scrutiny under new measures set out in today’s Queen’s Speech. In a separate statement, the Government has pledged to impose fines on banks which fail to treat customers fairly. But will Gordon Brown’s measures make a real difference to consumers? Will it kick-start lending? And can it rescue us from recession? We answer all the key questions
The Government has been forced to cut back its legislative programme to concentrate on the
economy. The original plan for 18 bills during the current session of Parliament has been cut
down to 12, with the overwhelming emphasis on plans to deal with the economic crisis.
Gordon Brown, the Prime Minister, has his hands full simply trying to maintain economic
stability, but he is also pledging that his Government will make sure that the banking industry
adheres to a “Treating Customers Fairly” policy. He is pledging that there will be no hiding place
for any bank using the challenges facing the industry as an excuse for sharp practice such as
slashing overdraft limits without good reason, and not passing on interest rate cuts to borrowers.
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Will the new Banking Bill prevent any more banks from going under?
The Banking Bill announced in the Queen’s Speech will give the Bank of England a statutory “
financial stability objective” and allow it to “lend in a more effective manner”.
In short, it gives the UK’s central bank new powers to provide short-term lending to banks in
trouble without having to disclose the fact. When Northern Rock got into difficulties, the Bank was
not allowed to keep confidential the support that the beleaguered Newcastle mortgage bank was
receiving. The disclosure that Northern Rock was being bailed out caused a run on the bank and
ended with the company being taken into Government ownership.
A new Special Resolution Regime will allow supervisory bodies to step in and sell a failing
bank to another bank, to nationalise it or to transfer it to an intermediate “bridge bank”
controlled by the Bank of England. This will give the failing bank a breathing space and, it is
hoped, maintain stability of the banking system.
In order to stop the authorities being taken by surprise by a bank getting into difficulties,
the City watchdog, the Financial Services Authority (FSA) will be able to scrutinise banks that it
fears are having problems more closely and share information with the Treasury and the Bank of
England.
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