This week has seen a seismic shift in the financial world. No-one can predict where the aftershocks will hit or where it will end, although many will try. Only one thing is certain: things will never be quite the same again.
Since the Northern Rock affair began a year ago, the focus in the UK has been on systems and structures. The so-called Tripartite oversight structure, involving the Treasury, the Bank of England and the Financial Services Authority, displayed crucial flaws. It was compared unfavourably by some with the supposedly more direct and decisive regime in the US, epitomised by the swift Federal Reserve-supported takeover of Bear Stearns. Heads rolled in the UK as the country’s banking insolvency and depositor protection regime was said to be inadequate – although the biggest supervisory scalp, that of the Governor of the Bank of England, remained intact, as did the political scalps of the Chancellor and the Prime Minister (although neither appears particularly secure right now). Some minor reforms were rushed through and more were promised. Discreet – ‘covert’ – rescues were said to be made impossible by cumbersome European regulations.
