Bank governor King fights for job
Updated on 20 September 2007
Bank of England governor Sir Mervyn King defends his handling of the Northern Rock crisis to a treasury select committee.
"I give you my personal assurance I would never do anything unless I thought it was the right thing to do" - the words of the governor of the Bank of England, Mervyn King, this morning.
He was refuting accusations he'd been lent on by the treasury to change policy and inject more credit into the banking system.
In his evidence this morning Sir Mervyn King told MPs it would have been "irresponsible" for the Bank of England to have intervened earlier to save the Northern Rock bank.
He also insisted he had not been lent on by the government to inject more credit into the financial system as whole.
It was in late July that the problems of bad loans in the US started to be felt in the financial markets. By 9 August the banks had stopped lending to each other, and the American and European central banks injected billions of dollars into the system to ease the crisis.
It was five days later that the governor said he first became aware this could mean serious trouble for Northern Rock.
A month later Northern Rock sought emergency funds from the Bank of England. Having got them, customers rushed to withdraw savings.
On Monday 17 September the government was forced to guarantee all deposits to stop the run. And in a policy U-turn, yesterday the Bank of England announced it would release £10bn into the banking system.
