Who's In Charge?

Despite the fact that the economy is teetering on the brink of recession, a time when one would have thought that the relevant regulatory authorities had their minds firmly focused on resolving this crisis, it is disheartening to read in The Times that there is a turf war going on between the FSA and The Bank of England.

At question is which organisation should have the power to take control of failing banks.

The FSA (without apparent irony) claims that duplicating the FSA's power would put Britain at risk of another Northern Rock debacle.

However, Mervyn King, the Governor of the Bank of England, told a Treasury Select Committee hearing last week:

"Either ought to have the ability to determine whether or not this trigger should be pulled and the bank goes into a special resolution regime. I do not think that should be left entirely with the supervisor because . . . of the natural reluctance of a supervisor to announce publicly that the supervision regime has not been successful."

I tend to agree with Mervyn King. The FSA has been shown to be asleep at the wheel over its "handling" (mishandling to use the correct term) of the Northern Rock fiasco, and as such should not be given the whip hand.

However, the real issue is the fact that there is no overall body (Bank of England, FSA or Treasury) in charge when things go wrong.

Until Brown and Darling resolve that, the regulatory regime will not be in a position to effectively step into the breach when things go wrong again.

Unfortunately, given Brown's inability to make a decision and the fact that he set the current tripartite system up, he will not give any one body regulatory control over the other two.

Until Brown is removed from office, the economy remains exposed to more Northern Rocks and the mismanagement that followed.