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Date: Tuesday 22 Jul 2008

LONDON (ShareCast) - Bank of England governor Mervyn King reckons the central bank should have the power to initiate state help for failing banks.

New proposals to reform the oversight of banks following the collapse and subsequent nationalisation of Northern Rock will only allow the BoE to make a recommendation to the Financial Services Authority that a struggling bank be rescued.

“It’s true that I would have preferred an outcome in which either the Financial Services Authority or the Bank of England could have initiated the trigger,” King told the Treasury Select Committee Tuesday.

“We will not have the right to initiate the trigger.”

He said the Bank would have handled the situation differently, preferring the immediate implementation of a special resolution regime.

But reform of the banking system to prevent fall-outs like Northern Rock should not be rushed just to meet deadlines, added King.

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