The European banking sector has been accused of being inadequately prepared to support securitization structures under crisis scenarios, despite a heavy reliance by these banks on the capital markets engine for funding. However, through new initiatives, European regulators are now making sure these financial institutions are more aware of the risks involved.
With Northern Rock's failure still in everybody's mind, U.K. financial regulator the Financial Services Authority (FSA) has stepped in to deal with this type of bank crisis. Last December, the FSA began prepping a new scheme that attempts to curtail future bailouts by other U.K. banks facing a similar situation to Northern Rock. According to the proposals under discussion, the FSA can seize and protect depositors' cash when a bank gets into financial difficulties.