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Chancellor faces MP finance panel Chancellor faces MP finance panel
(20 minutes later)
Chancellor Alistair Darling is to be questioned about the recent crisis at Northern Rock by the MPs that grilled the governor of the Bank of England.Chancellor Alistair Darling is to be questioned about the recent crisis at Northern Rock by the MPs that grilled the governor of the Bank of England.
Chairman of the House of Commons Treasury Select Committee John McFall said he had written to the chancellor.Chairman of the House of Commons Treasury Select Committee John McFall said he had written to the chancellor.
Mr McFall has said he wants to know why the Bank of England and financial authorities failed to foresee the recent crisis which hit Northern Rock.Mr McFall has said he wants to know why the Bank of England and financial authorities failed to foresee the recent crisis which hit Northern Rock.
Executives at the beleaguered banking firm may also be grilled by MPs.Executives at the beleaguered banking firm may also be grilled by MPs.
Possible new legislation
Mr McFall told the BBC that questioning key people from the market was likely if it was to "dig deep" into the issue.Mr McFall told the BBC that questioning key people from the market was likely if it was to "dig deep" into the issue.
Separately, the government said the Treasury was considering changes to UK banking legislation.
On Thursday, the Bank of England chief said existing laws had stopped him handling the crisis the way he had wanted.
Mervyn King made the comments when he faced the Treasury select committee, and a spokesman for the Prime Minister said that his comments would be considered.
Bank law was a "complex issue", the spokesman added but that it was "right that all legislation is under constant consideration".
'Searing look'
On Friday, head of the committee, John McFall, said the terms of reference for its probe into the UK's financial instability had yet to be fully established.
But asked whether Northern Rock executives may be called to give evidence, he said: "A lot has happened in the past 24 hours but I have no doubt that if we are going to have a searing look at this issue and dig deep then we will have to look at the market."
We need to reflect and then act to prevent repetition of anxieties and concerns which I recognise and with which I sympathise Sir Callum McCarthy, FSA chairman Northern Rock's share priceWe need to reflect and then act to prevent repetition of anxieties and concerns which I recognise and with which I sympathise Sir Callum McCarthy, FSA chairman Northern Rock's share price
About 70% has been wiped off the value of the bank's shares in the past week since it emerged that it had applied to the Bank of England for emergency funding. Separately, the government said the Treasury was considering changes to UK banking legislation.
At the close of London trading on Friday, its share price was 191.27%, up almost 5%. On Thursday, Bank of England chief Mervyn King told the committee that existing laws had stopped him handling the crisis the way he had wanted.
Policy u-turn About 70% has been wiped off the value of Northern Rock's shares in the past week since it emerged that it had applied to the Bank of England for emergency funding.
At the close of London trading on Friday, its share price was 191.27 pence, up almost 5% on the day.
Trade union Unite, which represents Northern Rock staff, said it had now secured a guarantee from the bank that there will be no compulsory redundancies following the recent events.
Cash influx
The unexpected run on the Newcastle lender prompted the Bank of England to announce it will pump £10bn into the banking system in an effort to cut the rate at which banks lend money to each other.The unexpected run on the Newcastle lender prompted the Bank of England to announce it will pump £10bn into the banking system in an effort to cut the rate at which banks lend money to each other.
This would be the first step in unfreezing the money markets and restoring confidence in Britain's financial system.This would be the first step in unfreezing the money markets and restoring confidence in Britain's financial system.
During a 30-minute auction next Wednesday banks will be able to bid for a maximum of £1.5bn and a minimum of £5m from the Bank of England to borrow for a three-month period.During a 30-minute auction next Wednesday banks will be able to bid for a maximum of £1.5bn and a minimum of £5m from the Bank of England to borrow for a three-month period.
The auction will determine the rate of interest and who gets the money.The auction will determine the rate of interest and who gets the money.
It will be the first of four auctions, with the others due to take place on 2,10 and 17 October.It will be the first of four auctions, with the others due to take place on 2,10 and 17 October.
The drastic move is a massive U-turn on the Bank's stated policy with regard to its treatment of banks which had relied to heavily on the availability of cheap debt to grow their businesses. U-turn
'Obvious risk' The drastic move is a massive U-turn on the Bank's stated policy with regard to its treatment of banks which had relied too heavily on the availability of cheap debt to grow their businesses.
FSA chairman Sir Callum McCarthy and chief executive Hector Sants will give evidence to the Treasury select committee next month and are expected to be challenged over whether the watchdog was fulfilling its role properly. FSA chairman Sir Callum McCarthy and chief executive Hector Sants will give evidence to the Treasury select committee next month, and are expected to be challenged over whether the watchdog was fulfilling its role properly.
The FSA has been criticised for not tackling Northern Rock's lending model before the bank hit difficulties.The FSA has been criticised for not tackling Northern Rock's lending model before the bank hit difficulties.
"The FSA has a lot of questions to answer... about why Northern Rock wasn't identified as the most obvious risk," committee vice-chairman Michael Fallon said during Thursday's hearing."The FSA has a lot of questions to answer... about why Northern Rock wasn't identified as the most obvious risk," committee vice-chairman Michael Fallon said during Thursday's hearing.
In a speech in London on Thursday, Sir Callum said the events of the last week, which saw a run on the Northern Rock as thousands of people queued to withdraw savings, had "been sobering for all". In a speech on Friday, Sir Callum said the situation at Northern Rock had "been sobering for us all"
"We need to reflect and then act to prevent repetition of anxieties and concerns which I recognise and with which I sympathise." "We need to reflect and then act to prevent repetition of the anxieties and concerns which I recognise and with which I sympathise."
The October select committee hearing was already scheduled but had previously been set to take evidence on the FSA's annual report.