Treasury breached own guidelines on Bank guarantee, MPs say

22 February 2010

The Treasury breached its own guidelines to the public sector when it failed to inform the Treasury Committee and the Public Accounts Committee of the guarantee given to the Bank of England over Emergency Liquidity Assistance (ELA), a Treasury Committee report concludes.

It comes after the Bank extended Emergency Liquidity Assistance (ELA) to, two institutions, RBS and HBOS, in the Autumn of 2008.

The report added that in giving evidence to the Committee, Sir Nick Macpherson, Permanent Secretary to the Treasury and Accounting Officer "was exceptionally frank and is to be commended".

The Committee report adds:

"Given the events surrounding the failure of Northern Rock, the extreme urgency of the situation, and the Bank of England’s view that 'secrecy was of the utmost importance', we can understand why the Chancellor decided that absolute secrecy was paramount, and why Sir Nicholas considered that decision proper.

"Nonetheless, in our view, the decision was overly influenced by the assumption that disclosure of the liability would have to be in writing. We welcome the Chancellor’s proposal that if such extreme circumstances arise in future the Chairmen should be briefed orally, and regret that this was not done when the indemnity for Emergency Liquidity Assistance was extended.

"In future, we expect Committee Chairmen to be briefed properly, whatever the circumstances."

The Treasury Committee is appointed by the House of Commons to examine the expenditure, administration, and policy of HM Treasury, HM Revenue & Customs and associated public bodies.

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