So in a free market it is justifiable to keep some “potentially situations” secret!?!? Hmmhh.
Secret from whom?
“The main case for an exception would be if disclosure could panic investors and lead to fears for a bank’s solvency, the regulator said.” Investors in the U.K. have all the right to panic.
“Under certain circumstances, immediate disclosure would still be required.”
These “certain circumstances” will occur when it is too late to panic!
The City watchdog has laid out plans to allow banks to tap the Bank of England for emergency funding without informing the market, in a move which might avoid a repeat of the run on the bank which led to the collapse of Northern Rock.
Under the European Union’s market abuse directive, regulated firms have to disclose price sensitive information. However, the Financial Services Authority yesterday said there were potentially situations where banks would be allowed to keep it secret if they had applied to the Bank.
The main case for an exception would be if disclosure could panic investors and lead to fears for a bank’s solvency, the regulator said. The FSA laid out a series of proposals in a consultation document. It invited industry groups to respond by September 30.
Critics may say the move comes too late. The Government has been attacked over Northern Rock, which, following a leak, confirmed to the stock market in September that it had appealed to the Bank for emergency funding. The announcement prompted thousands of its customers to queue to withdraw their money, and led to a plunge in the bank’s share price. The Bank was forced to lend billions of pounds to Northern Rock before it was nationalised in February.
The Bank has since set up the Special Liquidity Scheme (SLS) which allows banks in the UK to borrow money against triple-A rated assets to fund their business. Use of the scheme – which some believe has stretched from £50bn to more than £70bn – is confidential.
The FSA’s proposals yesterday concerned emergency situations which would probably not qualify for the SLS.
The FSA said its proposals “make clear that a financial institution in receipt of liquidity support from a central bank may have a legitimate interest to delay the disclosure of such support. The delay would be justified on the grounds that immediate disclosure could, by leading to a loss of confidence among consumers, exacerbate the existing liquidity problems and cause a threat to the solvency of the financial institution”, the FSA said.
The regulator added: “The proposal would not grant a financial institution an unconditional or indefinite delay to disclose the receipt of liquidity support. Under certain circumstances, immediate disclosure would still be required.”
By Katherine Griffiths, Financial Services Editor
Last Updated: 2:04am BST 22/07/2008
And just take a look at the US:
– US: Financial system is a house of cards
– U.S. Financial Breaking Point Soon
– Status Report on the Collapse of the U.S. Economy
– US: Total Crash of the Entire Financial System Expected, Say Experts
There will be soon panic everywhere.