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Friday, January 04, 2008

More Powers

The Chancellor of the Exchequer, Alistair Darling, has said that the government will give regulators greater powers to monitor and intervene in troubled banks. This follows on from the destruction of Northern Rock by the then board.

Darling stated that the Treasury will propose legislation in May to allow the Financial Services Authority (FSA) to question banks about their "day-to-day cash", as well as allowing the Bank of England and FSA to "conduct more efficient surveillance".

I am bound to point out that had the FSA been more proactive that, within the powers that they had at the time, they would have been able to intervene earlier and probably prevent the destruction of Northern Rock.

Another aspect of this failure is that of the tripartite monitoring system; whereby the FSA, Bank of England and Treasury fight amongst themselves as to who actually is in control of the financial markets.

The result being that no one actually takes any proactive action.

Under the current rules, the Financial Services Authority supervises banks while the Bank of England sets interest rates and controls market credit costs. Darling and the Treasury manage taxpayer money and the regulation of the system.

One of these three bodies needs to be put in charge of the other two, when it comes to market regulation. That of course will not happen.

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