Politicians have called on the Treasury to undertake a series of war games with regulators and the Bank of England to combat a “surprising and urgent gap” in its readiness for another financial crisis.
The report from MPs on the Public Administration Select Committee said it had “not seen sufficient evidence” that the Treasury appreciated the full risks to London’s “vulnerable and exposed” financial centre from potential catastrophes such as a crisis in the eurozone.
Despite an enhanced role for the Bank of England since the crisis, the committee also criticised the Government for not including systemic financial risks on its National Risk Register alongside potential events such as pandemics.
The Treasury was guilty of the “most surprising and urgent gap” in preparedness for sudden shocks, MPs said.
The report urges the Treasury to plan for a range of crisis scenarios triggered by non-financial as well as financial events, including desk-top exercises, or “war games”, involving the Bank of England and the Financial Conduct Authority.
The committee’s chair, Bernard Jenkin, said: “The Treasury has done a lot, but there is more to be done to be ready for another financial crisis. We still have institutions which are ‘too big to fail’ but with so much national borrowing capacity used up, they may prove ‘too big to save’ if it happens again.”