A Parliamentary inquiry into the performance of the Bank of England during the financial crisis should be ordered immediately, MPs said last night, after the Bank's Governor Sir Mervyn King made the surprise statement that he would be happy to co-operate with such a probe.
In a radio interview, Sir Mervyn denied accusations that he had persistently refused to allow a thorough investigation of the Bank's conduct during the period around the fall of US investment house Lehman Brothers and said that he would be pleased if such an inquiry was set up. "If it was felt that there should be another general review of the crisis we'd welcome that and we'd fully co-operate" he told the Today programme.
His comments came shortly before the Defence Secretary, Philip Hammond, claimed that consumers who borrowed too much must accept responsibility for the financial crisis alongside banks.
"People say to me: 'It was the banks'. I say, 'Hang on, the banks had to lend to someone'," he told The Daily Telegraph. "There were two consenting adults in all these transactions, a borrower and a lender, and they may both have made wrong calls."
Conservative MP David Ruffley said he would be calling upon the Treasury Select Committee, of which he is a member, to launch an inquiry into the Bank of England's handling of the financial crisis. The Bank's role in the credit crunch, particularly its handling of the near collapse of Northern Rock, has been criticised. Mr Ruffley said: "An inquiry into the past actions of the Governor of the Bank and his senior officials is essential and urgent."
Some, however, questioned what an inquiry would achieve, given that the Coalition has already decided to dismantle the UK's tripartite regulatory structure, which split oversight of the financial sector between the FSA, the Bank of England and the Treasury.
Andrew Tyrie, Treasury Select Committee chairman, said: "If the Governor thought that a review into the Bank's performance during the crisis had been necessary, it would have already have been completed."
O'Donnell: I want to succeed King
The former head of the civil service, Lord (Gus) O'Donnell, has suggested he may put himself forward to become the new governor of the Bank of England when Mervyn King retires next June.
In an interview with The House magazine, Lord O'Donnell, 59, said: "It's a fascinating job, it's a huge job, much bigger than Mervyn's doing at the minute. I'll decide nearer the time."