By Clara Ferreira-Marques and Steve Slater
LONDON (Reuters) - A panic response to the near-collapse of Northern Rock would damage the UK regulatory system, Britain's financial watchdog said, warning the full lessons from the crisis would not be clear until 2008.
The Financial Services Authority, responsible for policing UK banks, is facing the biggest test since it was set up seven years ago, accused along with other regulators of failing to do enough to prevent the first run on a UK bank in over a century.
Thomas Huertas, head of wholesale and institutional markets at the FSA, said a first review of supervision in the wake of the troubles at the UK's fifth-largest mortgage lender would be complete early next year.
"One has to be cautious about rushing off after turbulence or a crisis to suggest legislative change," he said.
"We've had, in this country, the Dangerous Dogs Act and, in the United States, Sarbanes-Oxley. There is ample evidence that legislation made in haste can create significant harm. One certainly needs to draw lessons but one shouldn't rush," he said at the Reuters Finance Summit.
Britain's 1991 Dangerous Dogs Act has been criticized as a piece of legislation rushed in to appease public panic, while the impact of the Sarbanes-Oxley rules, introduced in the wake of the Enron collapse, has been widely criticized.
Britain has already brought in some changes since Northern Rock was forced in mid-September to turn to the Bank of England for emergency cash, including introducing a guarantee to back up retail deposits in UK banks.
But Huertas said it was too soon to decide on changes to Britain's "tripartite" structure regulating banks. Continued...
© Thomson Reuters 2008. All rights reserved.
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