• Handing of emergency cash to RBS and HBoS in 2008/09 to be reassessed
  • Two further reviews will examine economic forecasting and ongoing plans to support banks
  • Probes to be conducted by experts who are not employees of the central bank

By Damien Gayle

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The Bank of England has bowed to pressure to reassess its actions during the financial crisis after governor Sir Mervyn King admitted it was 'late to the game' in tackling the banking collapse.

The Court of the Bank of England, which manages the affairs of the bank but does not set monetary policy, has ordered a probe of its handing of emergency funds to failing banks.

A further two reviews will consider the bank's track record in economic forecasting and ongoing plans for providing support to the banking sector in the event of a fresh crisis.

Scrutiny: The Bank of England has bowed to pressure to re-examine its actions during the financial crisis

Scrutiny: The Bank of England has bowed to pressure to re-examine its actions during the financial crisis

All three reviews will be led by experts who are not current employees of the central bank.

The court's decision represents a climbdown by bank chiefs, who until recently had insisted that all necessary internal assessments had already taken place.

Ian Plenderleith, chairman of investment company BH Macro and a former Bank of England official, will look at the supply of emergency cash to the Royal Bank of Scotland and HBoS in 2008/09.

Meanwhile, Bill Winters, who sat on the Independent Commission on Banking, will review current plans for supporting the banking system, while the former statistics chief at the U.S. Federal Reserve, David Stockton, will probe the Monetary Policy Committee’s forecasting methods.

The announcement comes after a former City minister labelled Sir Mervyn the 'least distinguished' Bank of England governor in nearly 100 years.

'Least distinguished': Bank governor Sir Mervyn King has been the target of fierce criticism from former Labour City minister Lord Myners

'Least distinguished': Bank governor Sir Mervyn King has been the target of fierce criticism from former Labour City minister Lord Myners

Labour’s Lord Myners said Sir Mervyn’s time at the bank had been 'one of considerable lack of distinction' and added the governor had 'politicised the Bank of England'.

The governor admitted earlier this month that more should have been done to avert the banking crisis and conceded the Bank of England should have 'shouted from the rooftops' that banks had been allowed to borrow and lend too much.

'We were certainly late to the game in understanding the scale of the fragility in the banking system and the potential consequence when those risks materialised,' he said.

Mr Plenderleith will look at the bank’s actions at the height of the financial crisis, around the collapse of Lehman Brothers, to provide emergency cash to RBS and HBoS, the Bank Court said.

He will examine how the bank discharged its responsibilities as lender of last resort in a crisis and make recommendations for the conduct of any such operations in the future.

Mr Winters, a former investment banker, will make recommendations to inform the future development of the bank’s operations, consistent with its objectives to implement the MPC’s decisions and to provide back-up support to the UK banking system.

Mr Stockton will examine whether the MPC’s forecasting procedures allow it to take full account of the relevant risks and uncertainties the economic outlook faces.

The findings are due to be published in October, ahead of a major overhaul of financial regulation which will see more power transferred to the central bank.

Earlier this year, Sir Mervyn defended the bank’s record despite it missing its inflation target for more than two years.

The governor said the UK would have suffered a much deeper recession had the bank raised interest rates to hit the 2 per cent target.

The last time inflation was less than 1 per cent away from the target was in December 2009, when it was 2.9 per cent, and it has been 3 per cent or above ever since.

Today he welcomed the reviews, telling the Financial Times: 'Major changes to the operations of the Bank have already been made in the light of the financial crisis.

'These detailed, independent reviews will help to ensure that all the important lessons for the future have been learnt.'

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Typical! Bankers investigating bankers. The bloke down the pub knows more about liquidity ratios than all the bankers combined. Perhaps some of the people with savings accounts at the Bank of England should be allowed to look at the books.

I don't think the Bank of England is as late to the game as some investment banks. I'm sure I read this morning that one of those huge investment bank's top economists believed that Greece would not leave the Euro. I hope all investment banks are planning for both outcomes for the sake of their investors.

Still using savers' money free of charge, though. - Philip, Bankrupted Britain, 21/5/2012 20:00

How about they let us know the names of the people we owe 4 Trillion to? - H.A.A.R.P, England, 21/5/2012 19:48

Is it any wonder no one admits to anything when as soon as you do everyone wants to set up a review with overpaid lawyers and hangers on!! Jobs for the boys. What a society we live in when all we pick is low hanging fruit whether is be criminals who admit there guilt or civil servants who admit making mistakes. But those who tell blatant lies get away with it and we don't bother to investigate.

We are all in it together, anyone expect to be seeing David Cameron or Mervyn King queueing in a soup kitchen any time soon?>>>>> Cameron was Leader of the Opposition at the time.

As long as these enquiries go in tandem with an inquiry into the Labour governments actions in failing to oversee the banks calamitous actions. Both in the run-up and when the crisis hit the banks.

i knew this was about to happen yrs ago where you might ask did i find this wisdom well it was the conspiricy sites people laughed at me when i told them and these lying snakes knew. theres no way that they woudnt know unless there stupid idiots

They will be given a fair trial.

We are all in it together, anyone expect to be seeing David Cameron or Mervyn King queueing in a soup kitchen any time soon?

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