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08 November 2007 / Toby Starr
Issue: 7296 / Categories: Features , Banking , Commercial
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MAD for it?

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Are lawyers to blame for the Northern Rock fiasco?
Toby Starr reports

The Market Abuse Directive 2003/6/EC, shortened to MAD by those who dislike legislation against insider trading, was intended to ensure that quoted firms were transparent with their investors and the market.
As was widely reported, on 20 September 2007 the governor of the Bank of England, Mervyn King, blamed MAD for preventing the bank from stepping in to help Northern Rock when he told the House of Commons Treasury Committee that “we were unable to carry out a lender-of-last-resort operation in the way we would have done in the 1990s, as a result of the Market Abuse Directive”. This was, said King, a major reason why the bank was unable to avert “the run on the Rock”.

During September, alongside the pictures of queuing savers, a public wrangle developed over the legal advice King had taken. The European Commission said that King’s advice was wrong and that there was sufficient “flexibility” in MAD for Northern Rock to keep information out of the

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