MEPs seek King retraction

Members of the European Parliament will urge the UK government next week to ask Mervyn King, the governor of the Bank of England, to withdraw his allegation that EU laws were partly responsible for the Northern Rock crisis.

French Socialist MEP Pervenche Berès and UK centre-right MEP Jonathan Evans will raise the issue with UK member of parliament John McFall, chairman of the House of Commons treasury select committee, who is to attend an annual meeting of national parliaments in Brussels on Tuesday (22 January).

King’s comments, alleging that the 2005 market abuse directive had prevented the Bank of England from carrying out a covert lender-of-last resort operation as it would have done in the 1990s, were made in the immediate aftermath of September’s run on the mortgage lender. The terms of the EU directive, he claimed, had forced disclosure of the loan, which in turn sparked public alarm.

The allegation was promptly denied by the European Commission, which quoted exemptions for actions by public authorities regarding companies "in grave or imminent danger". It later transpired that the UK transposition of the directive may have been significantly tougher than the original EU version, a practice known as ‘gold plating’.

"Gold plating compromised the government’s ability to act," said Evans, vice-chairman of the European Parliament’s committee on economic and monetary affairs. He said that King’s allegations had reinforced Euroscepticism in the UK.

Berès, who chairs the committee, reprimanded a Bank of England representative on Monday (14 January) during a committee hearing on the role credit rating agencies played in this summer’s liquidity crisis. She said that UK representatives had participated "actively" in discussions on the market abuse directive and had managed to "successfully put their points across".

"You cannot play all the games," she said to Nigel Jenkinson, executive director of the Bank of England’s committee on the global financial system. Jenkinson had earlier said that he stood by King’s comments.

Northern Rock, which has incurred a debt of £26 billion (€34bn) in state loans, is currently facing possible nationalisation. The UK government has already lined up former Lloyd’s of London chief executive Ron Sandler to run the mortgage lender should this happen. Bids from Richard Branson’s Virgin Group and investment firm Olivant Advisers are also being considered.

The embattled mortgage lender faced its shareholders on Tuesday (15 January. The meeting was the first of its kind since Northern Rock ran aground four months ago.

Members of the European Parliament will urge the UK government next week to ask Mervyn King, the governor of the Bank of England, to withdraw his allegation that EU laws were partly responsible for the Northern Rock crisis.