White Paper won’t beef up role of Bank
CHANCELLOR Alistair Darling’s White Paper on reform of the regulatory authorities, which has been delayed until next week, will not see a change in the structure of the tripartite authorities.
Business minister Lord Mandelson will tonight confirm that financial regulation will remain in the hands of a beefed-up Financial Services Authority (FSA) rather than transferring powers to the Bank of England.
In a speech to the British Bankers Association, Mandelson will say: “We need to keep prudential and conduct of business expertise in one place, in a regulator capable of seeing all parts of the picture at once. That regulator has to be the FSA.”
Mandelson will also reveal next week’s propsals should include the following themes: more macro-prudential supervision to target systemic risk; new capital rules that match the economic cycle and account better for different types of risk; a reshaped landscape for derivatives; and, a “fundamentally different approach to risk and failure” for banks with implicit government guarantees.
Madelson will say: “While I think there is an argument for the Bank taking a more direct role in financial stability issues, I don’t support a twin peaks system. I believe the lesson of the last year is that we need a stronger regulator, not a weaker one.”
Darling is also expected to reject a proposal for the Bank’s Monetary Policy Committee to be mandated to target asset prices as well as inflation.
The chancellor is understood to believe that such a fundamental change to the structure of monetary policy would be more risky for the economy than it would be beneficial.
The past few weeks have been fraught with disagreement over the future shape of regulation, with King and the House of Lords econonic affairs committe calling for a stronger Bank, while Darling wants to maintain the current system.