The much maligned Financial Services Authority (FSA) has been given another rebuke today in a report, issued by the Commons Treasury Select Committee, that says that the FSA must develop a better plan for warning banks and investors of high risks.
The Committee criticised the FSA and Bank of England for failing to ensure that financial companies were prepared for credit crunch.
The FSA and the Bank of England did warn many times that banks were lending too much and too easily. However, they did not match their words with actions.
The Committee wants the FSA, in future, to write a letter to financial companies highlighting two or three key risks. The FSA must then proactively confirm that the companies have considered the risks, and publish a commentary on the responses.
The Committee found that those in charge of the banks did not understand the products sold. No surprises there, as it was not logic or rationality that was guiding the banks' policies and product designs, but greed.
As to whether anything effective will actually get done, on the basis of this report, remains to be seen. The fundamental failing of the current tripartite regulatory system, created by Gordon Brown ten years ago, is that no one is actually in charge of it.
Until Brown goes, that situation will not change, and the tripartite system will continue to be ineffective.