Alistair Darling revealed his plans yesterday to "beef up" financial regulation, in the wake of the Northern Wreck fiasco.
Rather perversely, despite the Financial Services Authority (FSA) being given a drubbing for it slack lustre approach to the Northern Wreck fiasco, the government wants to give the FSA more powers.
Darling also rejected the Treasury Select Committee's call for the Bank of England to play a greater role in monitoring individual institutions. Instead the Government plans to legislate to make the Bank of England's role in financial stability more formal.
John McFall, the chairman of the Treasury Select Committee, was unimpressed and described the proposals as "vague".
He is quoted in The Independent:
"The financial stability links between the Bank of England and the Financial Services Authority didn't work, so we need that to be strengthened.
I am looking for a mechanism to increase the financial stability area and that is vague at the moment."
Darling has also proposed that authorities be allowed to give a bank covert support, in the event of a serious problem arising that would affect consumer confidence.
The fundamental weakness of the proposals are that:
1 They give more power to the FSA, which has yet to get its house in order
2 It still does not clarify who, within the tripartite system (Treasury, FSA and Bank of England), is in charge.
Until point two, at the very least, is addressed the financial markets will be exposed to more potential Northern Wrecks.