Brit Bank Watchdog Under Threat – US-FOREX.US
The recent efforts by the chair of Britain’s Financial Services Authority to reposition the organization as a “tough” regulator could be in vain. The Conservative Party – currently clearly ahead of the government in the polls – is proposing to scrap the regulatory body created by Prime Minister Gordon Brown in 1997.They’re proposing to hand bank supervisory powers to the central bank, the Bank of England and create a separate consumer protection watchdog that would safeguard consumer rights. It’s broadly in line with the changes that President Barack Obama has proposed for the U.S. – giving the Federal Reserve supervisory powers over banks, and creating a body to champion consumer rights.It’s a clear swipe at the prime minister, breaking down the tripartite system of financial regulation, which is split between the government Treasury department, the FSA and the Bank of England, that he created when chancellor. The Conservatives would create a Financial Regulation Division within the Bank of England and a Financial Policy Committee similar to the rate-setting Monetary Policy Committee, which would monitor systemic risks and have the power to break up banks. It’s a significant shift being proposed that will probably lead to a tougher clampdown on the banking system. “[Governor of the Bank of England] Mervyn King has made it pretty clear what his thoughts are on the banking system. The Bank as a regulator will probably be more hostile to bank shareholders than the FSA was,” said Leigh Goodwin, a banking analyst at Fox Pitt Kelton in London. Shares in the banking sector soared after troubled American lender CIT approved a 3 billion emergency loan from major shareholders. Lloyds Banking Group
was up 7.2%, and the Royal Bank of Scotland
up 5.5%. The British government has taken on some 1.4 trillion in liabilities as it was forced to step in to rescue Royal Bank of Scotland and Lloyds Banking Group, formed through the merger of Britain’s HBOS and Lloyds TSB. The FSA’s Turner has accepted part of the blame for the bank failures taking place and has already begun to step up the supervision of banks, and has said they’re considering a range of tougher measures including more onerous capital requirements on banks with large investment banking divisions.