How Rock is hurting London

Thereby hangs a tale. In the early stages of the crisis, before there had been any public acknowledgement of Northern Rock's parlous state, a senior member of the European Central Bank (ECB) was to be heard spitting blood at a private - and unfortunately off the record - dinner in Brussels, because of the stance taken by Bank of England Governor Mervyn King.

What had reduced this person to fury was that at that stage the Bank of England's colours were firmly nailed to the moral hazard mast. King was saying publicly that it was quite wrong to use public or central bank money to save banks from their own folly.

By implication, he was criticising the decision by the US Federal Reserve and the ECB to do just that by pumping liquidity into the markets, and was further implying that the Bank of England saw no need to do likewise.

But as this person said, King only had the luxury of clinging to the high moral ground because the London-based British banks under his supervision were using their eurozone branches to mop up as much of the ECB billions as they could get their hands on.

The main users of the ECB facility, he alleged, were the banks in London. This liquidity was then being pumped straight back across the Channel with the net result that the ECB was bailing out the British-based banks - while being preached at for doing so.

Applegarth's comment is perhaps the first official on-the-record acknowledgement that this was indeed going on.

Relations then between the ECB and London were distinctly sour. They improved a bit as the ECB rather enjoyed the Bank's subsequent embarrassment over Northern Rock, but they still have a long way to go to get back to where they were before the summer.

It is hard to escape the regrettable conclusion that this affair has damaged London's standing far more than we might think, and in ways that are not immediately obvious.

Kitty Ussher scored a bigger hit yesterday at the annual conference of Apcims - the trade association of stockbrokers and private-client fund managers - than might be thought likely for a new-to-the-job Labour Treasury minister straight after a controversial Budget.

Delegates did not like her refusal to take questions, thinking it might be interesting to get her off her prepared script. But at least the script itself was reassuring.

In particular, she said there would be no knee-jerk reaction from the Government to the current crisis - no Sarbanes-Oxley nor "the stifling rigidity of a pan-European regulator". She firmly rejected the "mutterings abroad...that our concept of principles-based regulation had been found wanting".

"As we learn the lessons from recent events, it is important that we don't overreact," she said. As a policy stance, this is a welcome change. Governments' normal reaction to such accidents is to pass the financial equivalent of the Dangerous Dogs Act - in the naive belief they can legislate away all future risk of upsets in financial markets. If politicians no longer believe in legislation, we have indeed made progress.

To be realistic, however, is to have doubts. In the wake of the run on Northern Rock, Chancellor Alistair Darling has announced plans broadly to copy the US approach to guaranteeing bank deposits of up to £100,000. While our system does need an overhaul, this could be thought of as an overreaction. The total is far too high - £30,000 would be quite sufficient for retail deposits - and the panoply of intervention and oversight that goes with the US system is not something to be welcomed here.

So while Ussher's words are welcome, it remains the case that ministers shall be judged by their actions. use others if they so wish - but being on the list brings the cachet, unofficially at least, of FSA approval. The usual suspects are on there - the London Stock Exchange, Plus Markets and so on - but there is one striking omission.

Boat, the information service launched with much fanfare by some of the key members of the investing banking community to break the stranglehold of the established players, has not made the cut. It is not on the list.

Some mistake, surely? Apparently not. Boat has been excluded, and as far as one can judge it is because it charges too much - one of the criteria the FSA applies. It wants to be satisfied the data supplied are reliable, can easily be consolidated with data from other sources, and will be available to the public at reasonable cost.

Boat is, of course, eye-wateringly expensive - ironically so, given the declared reason for launch was the belief that the London Stock Exchange charged so much. But whereas the LSE levy is £3.50 for real-time trade reporting data, and free after 15 minutes when it is considered out of date, Boat charges e120, near enough £80, and still levies a charge, albeit much reduced, on data after 30 minutes.

Still, the FSA's implied criticism appears to have had some effect. Boat yesterday announced a reduced-price introductory offer that will clearly make a difference - at least until, like a subprime mortgage, the price resets.