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FSA to become Bank of England subsidiary

Robert Peston | 16:49 UK time, Sunday, 13 June 2010

Reports that the coalition government is backing away from the abolition of the Financial Services Authority as an independent financial regulator seem to be premature.

My understanding is that the part of the FSA that monitors banks, insurers and other financial institutions to prevent them taking excessive risks will become a formal subsidiary of the Bank of England.

I expect this to be announced by the Chancellor, George Osborne, in his first Mansion House speech on Wednesday evening.

In other words the Bank of England would have ultimate responsibility for banking regulation and supervision as the "owner" of the reconstructed and slimmed-down FSA. But the financial regulator would retain its own board and - to an extent - its own identity.

This transfer of responsibilities to the Bank of England would represent a symbolic and substantial reversal of one of Gordon Brown's first acts as chancellor in 1997, when he removed banking supervision from the Bank of England and merged it with other City regulatory bodies to create the FSA.

That said, my impression is that Mr Osborne is trying to preserve a semblance of independence for the FSA by putting its financial regulatory activities into a legally separate subsidiary of the Bank of England, rather than into just another operating division of the Bank.

Within the Bank of England, a new Financial Policy Committee would also be created, consisting of Bank executives with a direct responsibility for financial stability and senior representatives from the FSA.

This Financial Policy Committee's primary duty would be to maintain financial stability, or avoid the kind of crisis we experienced in 2007 and 2008 when bank after bank went to the brink of collapse and we came close to the meltdown of the financial system.

The committee would have a set of so-called "macro-prudential tools" to deter banks from providing credit when there are signs that the economy or parts of it - such as the housing market - are overheating.

It would also have the new financial supervision subsidiary of the Bank of England under its sway. And it would expect to be the ultimate decision making body for regulatory decisions affecting the activities of the biggest banks and insurance companies.

So, for example, if a big bank wanted to buy another big bank, the Financial Policy Committee would determine whether that should be allowed or whether it should be sanctioned only subject to conditions designed to minimise the risks of the deal.

The ambition would be to avoid a repetition of the kind of regulatory disaster that occurred in 2007, when Royal Bank of Scotland was permitted by the FSA to buy the rump of the giant Dutch bank ABN Amro, and did so in a way that made the enlarged bank too dependent on unreliable wholesale finance and slashed the amount of capital RBS was holding relative to assets as a buffer against losses.

That takeover by RBS was the primary reason why RBS had to be rescued by taxpayers in Britain's biggest ever financial bailout in the autumn of 2008.

George Osborne has long been critical of the tripartite regulatory system imposed by the previous government, in which oversight of the financial system was shared between the FSA, the Bank of England and the Treasury.

Osborne and other critics of the tripartite system argued that it was cumbersome and meant that in practice no one could be held sufficiently accountable when a big bank (or in practice, a whole series of banks) ran into difficulties.

Under Osborne's proposed reforms, the buck will very firmly stop with the Bank of England. The Bank of England will be to blame if there's another banking calamity that tips the UK back into recession.

Now you may think that none of this is news - in that these reforms are very much in the spirit of the regulatory changes Osborne proposed when shadow chancellor.

But ever since the coalition government was created last month, it has become widely believed in the City that Mr Osborne had dropped his previously announced commitment to "abolish the FSA" (which was the phrase used in a Tory policy document, "Change for the Better in Financial Services", published in April).

The supposed evidence that Mr Osborne had dropped his determination to dismantle the FSA was that the Tories' coalition agreement with the LibDems made no mention of plans for the FSA at all. Instead, all that document said was that "we will bring forward proposals to give the Bank of England control of macro-prudential regulation and oversight of micro-prudential regulation."

That vague formulation, "oversight" of micro-prudential regulation, suggested that the FSA might be preserved to a large extent.

But in the end, Mr Osborne has taken the view that there needs to be a cultural revolution to toughen up the supervision of banks and other financial institutions - which can only be achieved by separating that activity from consumer protection and also by putting the Bank of England into the driving seat.

Anyway, enough of the hermeneutics.

Related reforms likely to be announced by Osborne are the separation of the FSA's consumer protection operations into a new Consumer Protection Agency and of its enforcement activities into a new Economic Crime Agency.

However there are plenty of unanswered questions. These include:

1) Will Osborne set up the new operating arrangements for the Bank of England and FSA in shadow form, so that the system is working in an informal sense relatively quickly prior to the necessary legislation going through parliament?

2) What will be the relationship between Paul Tucker, the deputy governor of the Bank of England in charge of financial stability, and the new regulatory subsidiary of the Bank of England?

3) And, is it remotely possible that one big beast in the financial policy jungle, Lord Turner, chairman of the FSA, would agree to be answerable to another big beast, Mervyn King, governor of the Bank of England?

Mervyn King as Adair Turner's boss? Hmmm. That doesn't sound like a sustainable or even plausible relationship.

Comments

  • Comment number 1.

    In the USA they talk about allocating more power to the private FED, that's never been audited and over here more power to the BoE.

    All measures are in preparation for the re-introduction of gold standard. Sovereign debt in fiat money will be swapped for a debt in gold, held in a global central bank with local subsidiaries like the BoE.

  • Comment number 2.

    Let's start with the 740 BofE people who were moved over to the FSA and lost their gold plated pensions, who pays to reinstate them? Or will they carry on pretending to be 'independent' regulators in an independent regulatory environment? They can't fool us!

    Unless the regulators are independent of government and therefore outside the influence of politicians and ministers I can't see any of this working any better than any previous version has since regulation as we know it was created in 1985 by the then government which was Conservative. Does that need some punctuation?

    The Board of the FSA is appointed by HM Treasury, "What, all of them?", yes all of them. The BofE Board is also appointed by HM Treasury, yes all of them. The FOS Board is appointed by the FSA and approved by HM Treasury, same goes for the FSCS, yes all of them.

    I agree with Robert Peston, it doesn't sound sustainable or even plausible.

  • Comment number 3.

    The problem with Gordon Brown's tripartite system of regulation was, as you in imply, that it left nobody in charge. This need not necessarily have been a bad thing if the then Chancellor had possessed the imagination and the political capability of calling a stop to the insanity of the financial markets. We now know that he lacked the necessary skills to make that and other decisions.

    By bringing the FSA under the Bank of England, whilst not a return to the highly effective market regulation by brown sherry as traditionally practised by the Bank, it does suggest that the Bank has the final word on the markets. This worked reasonably successfully for the previous 300 years prior to 1997. This can only be a good thing so long as the competence and the will is there to impose order in the markets.

    On this latter point I am a little disappointed that you have not taken up the issue of separating retail banks from the casinos. There has been a further report on this matter which very much echoes what many of us have been saying for the last eighteen months or so. Whilst it is good to know that one is part of a crowd, the next thing which is needed is for the political class to actually do something about it.

    The only reasonable thing we can do for now is to watch this space. To a degree one is relieved to see public policy moving in the right direction but it is not happening fast enough. I can understand that the coalition government has a lot on its plate but this issue, as David Davis pointed out to Andrew Marr this morning, has to be grasped early for the simple reason another bank bust will wipe us all out.

    Once we have an effective organisation in place to manage the markets we then need to ensure that the cast list of regulators and their managers are capable and effective in their roles.

    The alternative to not doing any of this is that we break up the financial services industry completely as it has become a total menace to ourselves, our children, and grandchildren. I think such a simple either/or message has to be spelt out to the City in capital letters as there remain many there who just don't get it.

  • Comment number 4.

    And the other big issue, which seems to have been totally overlooked is what happens to markets supervision?
    Osbourne has mentioned nothing about this - and this is one of the FSA's biggest responsibilties.
    And what about financial crime? Economic crime is not the same thing at all. The FSA's fines on firms for anti-money laundering offences and data security breaches do not come under the Coalition's definition of economic crime. So what happens to that vital role?
    All in all, a complete dog's breakfast of a decision if it transpires that this what happens.

  • Comment number 5.

    It cannot be a bad thing to concentrate powers, as a lot of power is needed for the government to win back control over the City. Let's hope this will do something. The Bank of England needs to be the driving force for radical reform. M. King has at least occasionally made some common sense comments, whereas the rest of the country - politicians, bankers and indebted homeowners are still in denial, almost three years into the hangover from more than a decade of being credit addicts.

  • Comment number 6.

    Memories are short. There was a reason for removing banking oversight from the Old Lady - BCCI and Blue Arrow. Some felt that the Bank of England was not good at handling its conflict of interest between wanting to maintain orderly markets and protecting the interests of customers of financial institutions. The tripartite setup was not the solution. The Governor of the Bank of England must be respected and even feared by bankers so needs teeth. Giving supervision of the stability of the banking system to the BofE must be right but not consumer protection. There is still an enormous valuable job to be done to see that there is proper competition in the supply of financial services and "truth in lending" and selling. The whole Personal Pension system needs an Adair Turner personality and brain to reduce the regulatory cost of setting up a Personal Pension fund and to see that there is vigorous and open competition for the provision of pensions, insurance, health cover et al. It would be wrong to give that to the Bank but a tough character is needed to get some sense into it.

  • Comment number 7.

    Excellent decision, hope you are correct

  • Comment number 8.

    They're breaking 'em up, I tell yah! They're breaking 'em up!

  • Comment number 9.

    Business as usual then?, same names , same faces not what you call a radical reform just shuffling the chairs around in the room.
    The financial services industry needs a lot tighter regulation and certain actions or lack of actions need criminal offences and jail time.
    Setting up Ponzi schemes in all of there various disguises, insider trading, market manipulation, speculating on commodities forcing huge swings in the markets, currency speculation which damages a countries economy but makes bankers very wealthy, gambling with other peoples money.
    What happened to splitting off investment activities from retail banking?

  • Comment number 10.

    If they do not clean things up then perhaps the only solution that the general public has is to stop using the banks, insist on being paid in cash and use credit unions owned by the people.
    Either that of have a very good safe in your house, I personally will never trust the financial services sector again.Nothing more than sharks in suits leveraging every bit of cash out of your pay packet.

  • Comment number 11.

    plamski: All this gold standard nonsense. The amount of gold which was mined since beginning of times amount to 0.05 % of the world economy, furthermore its value is determined by psychology, not any objective criteria (not really used for anything, except a bit to jewelry and electronics, its industrial usage is declined actually).
    If you want to go back to basics, please choose a more useful commodity...

  • Comment number 12.

    Why not let the State run all our Pension Schemes , keep these people away from our life long retirement savings! Its a lot simpler the government does not need to borrow the cash from the banks then, freeze them out of the big financial transactions.
    Restore the balance of power, putting all of your hard earned life savings in to a private pension has been proven to be the wrong decision for millions of workers.

  • Comment number 13.

    One thing gold has in its favor you can actually see it, touch it, store it.Printing paper money leaves you with nothing, a bit of useless paper!
    Nobody can see the reserves with paper money, house are bricks and mortar may be the new reserve should be houses!
    The banks own the title deeds to these for the time you are paying the mortgage back at least. Never understand that, you pay hundreds of thousands of pounds just for the privilege of putting a roof over your head.
    Another British obsession owning homes and paying a fortune in interest to banks for the right to one day own it.

  • Comment number 14.

    " Osborne and other critics of the tripartite system argued that it was cumbersome and meant that in practice no one could be held sufficiently accountable when a big bank (or in practice, a whole series of banks) ran into difficulties."

    Utter rubbish

    The person responsible when a bank gets into difficulties is the boss of the bank!

    A bank is a company like any other. If the local one man band at the market gets into difficulty it his considered his fault no matter what the economic circumstances are. The same applies for a bank

    It is not the head of the FSA/BoE/Treasuries/GB's fault that RBS's takeover of Amro went south becasue RBS bit off more than they could chew. It was RBS's fault, everyone at the time but them thought they were paying too much and it cost them.

    This country is getting way to much like america with everything always being someone elses, preferably the governemnts, fault. People need to take some responsibility.

    The Tories proposal basically means that they have someone who they can sack and blame for any future recessions rather than taking the full blame themselves, or their mates running the banks taking the blame.

    It is a blatent exercise in buck passing and has absoloutly nothing to do with proper economic management.

  • Comment number 15.

    Every western bank has off loaded the debt on to the taxpayer in there respective countries. The banks are clawing back cash by deliberately holding interest rates high on mortgages, credit cards, overdrafts.
    And nobody is asking the questions :-
    1) Why are credit card companies charging 19-25%?
    2) Why are mortgages still being charged at 5-7%?
    3) Why are overdrafts still being charged at 19-28%?
    When the bank base rates is at 1%, it glorified extortion and people should be up in arms or better still with holding payments. Then they will charge you even more interest!
    Governments need to regulate interest rates being charged or better still Nationalize the lot of them.The banks created this mess but its ordinary people losing there jobs and homes in ever increasing numbers!
    And here we are fiddling around at the edges doing a few face saving changes, just shows how much lobbying power the financial services sector has to water down any changes made, to the point were we have very little change!

  • Comment number 16.

    KeithRodgers: State pension, brilliant:) The state spends the money you pay in now and promises to pay your pension in 30 years. As it spends more money then it brings in consistently (see the deficit projections) what is this religious belief that it can and will honor the promises? None of the current politicians (the ones who spends your money now) will be there, so they can promise anything...
    Furthermore as someone who actually experienced the overwhelmingly state controlled economy - socialism - I hope you don't get what you wished for.

  • Comment number 17.

    13. At 7:05pm on 13 Jun 2010, KeithRodgers wrote:
    One thing gold has in its favor you can actually see it, touch it, store it.Printing paper money leaves you with nothing, a bit of useless paper!
    Nobody can see the reserves with paper money, house are bricks and mortar may be the new reserve should be houses!
    The banks own the title deeds to these for the time you are paying the mortgage back at least. Never understand that, you pay hundreds of thousands of pounds just for the privilege of putting a roof over your head.
    Another British obsession owning homes and paying a fortune in interest to banks for the right to one day own it.

    IN many cases, the cost is cheaper when compared to rent, and it means no rent in retirement, assuming the mortgage is cleared by then

    Does this help you to understand?

  • Comment number 18.

    Baron Turner of Ecchinswell,

    hes very lucky to have a job at all, in fact its about time there was a major clear out as they seem incapable of performing their function.....his defence was that they didnt see what was coming because they were looking too hard....

    i would like to see that stand up in the peoples court....

  • Comment number 19.

    Does anybody know if any of the cash bail out money has been paid back to the government? Or are they still pumping up the profit figures with the bail out cash, a bank on steroids that has to be another slight of the magicians hand.

  • Comment number 20.

    14

    You make one very good point re the stupid RBS decision re ABN Amro, yet the remainder of your post is utterly the wrong way round

    Part of the issue with the banks recently, was that FSA didn't understand what they were regulating, and each of the three parties 'regulating' thought one of the others was 'in charge'

    It is important to differentiate between partisan views and reality sometimes

    If Osborne truly wanted to pass the buck, he would hardly have set up the OBR

  • Comment number 21.

    16. At 7:22pm on 13 Jun 2010, paroma wrote:
    KeithRodgers: State pension, brilliant:) The state spends the money you pay in now and promises to pay your pension in 30 years. As it spends more money then it brings in consistently (see the deficit projections) what is this religious belief that it can and will honor the promises? None of the current politicians (the ones who spends your money now) will be there, so they can promise anything...
    Furthermore as someone who actually experienced the overwhelmingly state controlled economy - socialism - I hope you don't get what you wished for.
    ---------------------------------
    More a case of the lesser of the two evils,
    a) lose some of your state pension when you get to retirement.
    b) lose ALL of your pension when your company scheme folds.
    I know which one I would bet on!

  • Comment number 22.

    17. At 7:23pm on 13 Jun 2010, Kevinb wrote:
    Yep I understand that logic and its the one thats always pushed around when you question the interest being paid on the loan. Its still a lot of interest on the debt, a debt which is consuming more and more of peoples income.
    Then there is the other irony, you finally get title to the home and retire and you are not allowed to claim benefits because you are considered wealthy. And you end up having to sell it to finance your golden years because your private company pension has gone down the pan.
    I hate to say it but all of these concepts are nothing more than Ponzi schemes, the young can see that but not the middle aged.
    I would sooner have jam today rather than be promised jam tomorrow, after thats what saving, buying a home, pension is all about promising you jam tomorrow.
    The younger generation see it for what it is a means of making us all debt slaves for the rest of our lives with the promise that we will have a glorious retirement assuming we manage to get there!

  • Comment number 23.

    21

    As far as pensions go, the main problem with any state provision is that it doesn't grow, in other words, there is no investment element

    It is also completely unfunded

    Your NI payments this week, go to Mr Jones to pay his state pension next week

    Due to longer life expectancy, it is a timebomb, and all governments from the mid 1970s onwards have been grossly negligent in doing nothing to deal with it

    The situation is not going to get any better any time soon


  • Comment number 24.

    I don't really care what they do up at the top: I'm more interested in what's going on with us down at the bottom. I'd like to see a viable alternative to banks for the common man: somewhere he can put his money, and have access to it, and it will always be safe, without it being used to gamble with by others on something he has no say or control in. And I don't mean under the mattress!

  • Comment number 25.

    22

    If your view is entirely idealogical, then that is your perogitive

    House Purchase is not a Ponzi scheme, that is just wrong

    If you are relying on claiming benefits, then you may be in for a shock by the time you are at retirement age

    Anyway, waste of time explaining it to you, if you are a jam today person, as with that approach to risk, you will probably be dead before you are 70

  • Comment number 26.

    24

    It is there already...national savings through the Post Office

  • Comment number 27.

    24. At 7:58pm on 13 Jun 2010, Graphis wrote:
    I agree with your comment , there has to be a better way for ordinary people to conduct their transactions other than banks.
    Ask yourself this question, if a friend came to you and said I have a great tip on the horse running in the 4:30 would you lend me a $1000 GBP? You would listen and then say no of course not !
    But thats exactly what you are doing when you hand over your hard earned cash to a bank every week or month! They are gambling with our money and have been doing this for years, pocketing lots of cash earned when the times were good, and dumping the debt on to us when the gambles did not pay off!

  • Comment number 28.

    Not ALL banks....

    Don't let that ruin your rant though

  • Comment number 29.

    25. At 8:01pm on 13 Jun 2010, Kevinb wrote:
    Actually Kevin I have split my pension each way.
    Some in private investments (private individual schemes NOT company schemes).
    And the rest is with the State Scheme, hedging my bets.
    I have seen so many workers being burnt by failing company schemes losing everything when the company folds and the pension scheme goes bust.
    Young people see this they no company schemes will vaporise thats why they will not touch them with a barge pole. The kids these days are smart they know about demographic time bombs and are covering their own needs first.

  • Comment number 30.

    29

    I don't really see the state pension as a hedge in the financial sense

    Anyway...

    Company Schemes going bust is not good, and personally I have a SIPP

  • Comment number 31.

    Companies are purchased for the size of the pension scheme surplus.
    Then they raid the pension funds to fund further acquisitions, hence depleting the cash reserves for the workers left in the scheme.
    Then they sell the business on and cash the assets in and move on.
    Leaving the worker with a very poor private pension after the raid.
    All this is legal and its been done for the last 25yrs or so and is the principal cause are why so many of them are in the red.

  • Comment number 32.

    Keith

    This is just nonsense

    You are living in fantasy land

    Maxwell did it, since then it has not been possible

  • Comment number 33.

    This is just a test, the Scottish blogs are operating a censorship policy against the Newsnet Scotland news site.



  • Comment number 34.

  • Comment number 35.

    What on earth sort of plan is this? Mr. Osborne doesn't want a tripartite regulatory system? But count them:
    1. within the Bank of England, a new Financial Policy Committee
    2. the Bank of England itself and
    3. subsidiary FSA.
    One thing is for sure. Sally Dewar wants no part of it, and that in itself causes me pause. Sally Dewar announced her resignation as the Financial Services Authority's Head of Risk. This is a serious blow to the FSA.
    In fact, I really don’t have a clue what the Coalition Government is doing or why.
    Weeks have drifted by, and I’m no clearer on what it means to give the Bank of England "control" of
    - macro-prudential regulation and
    - "oversight" of the micro-prudential.
    What on earth do these big technical-sounding words mean? I think they mean:
    - regulation over big-wise and
    - oversight of small-wise?
    The Coalition Government has succeeded in confusing me.
    Dewar, only 41, was seen as the heir apparent to Chief Executive Hector Sants, whose own departure was announced in February, but her plan is to step down next May. There is no doubt that Sally Dewar’s decision must have been at least partially influenced by the uncertainty following 11 months of Mr. Osborne BoE/FSA decision-making, detail-lacking, sorry delegation.
    Banks cannot regulate themselves – whether or not they have a regulative authority. Have we not borne witness to this very fact through the last few years of financial catastrophe?
    In my opinion the FSA under the BoE is like putting the chickens under the fox in the chicken-house.

  • Comment number 36.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 37.

    35

    The FSA are a busted flush

    They are correctly back under the control of the BOE who have RESPONSIBILITY for them

    What is so wrong with that?

  • Comment number 38.

    The FSA have a role and its the handling complaints from consumers about insurance policies and other issues etc ... the mundane side of finance ... the stuff that provoked Mervyn King to say something to the effect of 'don't you dare land that pile of complaints and other stuff onto my desk ... that's what the FSA should be dealing with instead of playing ... King Quango'.

  • Comment number 39.

    Oh dear John from Hendon won't be happy!
    Merv has more power not less.
    Good decision Osborne!

  • Comment number 40.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 41.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 42.

    24. At 10:21pm on 11 Jun 2010, John_from_Hendon wrote:
    #19. Kevinb wrote:

    "I am not prejudiced..."

    Oh yes you are and what's more you are a bigot! You either deliberately ignore the facts or you are incapable of recognising facts or reality. You live in a fantasy world, where real events are never allowed to influence your prejudices.

    Oh and by the way, you also have a bad case of a persecution complex - the poster of #18 did not mention you, but your arrogance assumed that he/she was referring to you. Go get some treatment!

    SEE BELOW WHAT YOU POSTED, AND APOLOGISE

    53. At 10:39pm on 08 Jun 2010, John_from_Hendon wrote:
    #46. NonLondonView wrote:

    "That's crazy talk..." (write off debts, but retain ownership of the secured asset)

    But it does show how appallingly bad the position is for some borrowers. (see KevinB, Random Thought etc...) that they think that they will be able to escape their debts. Let me tell them that the only way they can do this in this manner is to die. Death wipes out debts in the UK, but not in all jurisdictions, but even death offers no escape where there are guarantors.

    These appallingly imprudent (or just unlucky?) borrowers are stuck with their debt which will inevitably cost more and more to service - that is the grim reality that they cannot face and they will also have to face up to chronic negative equity.

  • Comment number 43.


    112. At 11:28am on 09 Jun 2010, John_from_Hendon wrote:
    #99. newblogger wrote:

    "Why can't we fully nationalize RBS and LLoyds?"

    If we did the liabilities of these banks would be seen part of the public debt. They as our public debt would be the worst in the World we would be lucky if we had a B- credit rating. Then our interest rates would be forced up to 10 % to 15%. The economy would immediately collapse along with sterling.

    Rather like a country having a personal debt problem akin to KevinB's (and the others who want debt forgiveness) - we would be bust. The IMF would then step in and we would be forced to sell the banks in a fire sale, unemployment might go up to 20 or 25%, end of the NHS, end of the state pension and an end to all social security payments - and the City of London would declare independence!

    So we dare not even mention hanging on to the banks!

    You need to face up to the lies you have posted

  • Comment number 44.

    The Bank of England - in Charge?

    The problem with George Osborn's proposals is that both the FSA and the Bank of England failed to understand their role and duty in the run up to this economic calamity. The Bank has 200 economists (the biggest bunch in government) and yet failed to understand the inevitable consequences of creating credit on the scale it was created during the last decade.

    For this to work the entire Bank of England, from the Governor down needs to be replace by people who properly understand their role in the managing of credit availability and the creation of money. This is because the Bank of England catastrophically failed to understand this and this led directly to the bubble economies that directly led to the crash. These 'economists' employed by the Bank (and the whole of the FSA - and HM Treasury) failed and have so degraded the description 'economist' as to make it a term of derision.

    The only way the Bank of England can be put in change is under a completely new management - and with the very clear written direction to use the instrument of interest rates to manage the money supply and through this all forms of inflation. The latter is crucial. The Bank has repeatedly used the attempted excuse that it was only following orders to manage to the cpi. This excuse MUST be expunged and it MUST be made clear that they are responsible for moderating all forms of inflation - something that any central banker with integrity would have seen as his duty in the past.

  • Comment number 45.

    Now, will you withdraw the comments and apologise please

  • Comment number 46.

    Why is it, John from Hendon, that you have referred my comment?

    Hiding from the truth?

    Why don't you just apologise for your error, and slur?

  • Comment number 47.

    KevinB

    You have clearly lost your marbles.

    1. The context in which the first post was written was that you and others were advocating debt forgiveness and the retention of the secured assets by the forgiven debtor. Why would you want this unless you have a personal reason for doing so as it is entirely illogical and will destroy banking and capitalism?

    2. The only logical explanation for wanting debt forgiveness is that you have debts that will be forgiven and you will gain from the implementation of this absurd idea - something I have put to you and you have refused to deny.

    I rest my case. I have you bang to rights. Now agree that people who borrow must pay back their debts - which you have failed to do on several occasions.

  • Comment number 48.

    To anyone who is silly enough not to realise that theBOE have had their mandate widened behind the scenes, to keep rates low, then maybe they will realise this soon

    Only a complete dinosaur, living in the past would think otherwise, or someone with a grudge against Mervyn King

    That would be the Mervyn King who said borrowing was out of control, and was ignored by Gordon 'No more boom and bust ' Brown

  • Comment number 49.

    44

    John from Hendon wrote

    any central banker with integrity would have seen as his duty in the past.

    As you feel integrity and duty are important qualities, presumably this means that you will withdraw the smears that you posted against me, with no foundation whatsoever

    Anything other than a full apology and retraction will simply demonstrate to everyone what sort of person you are

  • Comment number 50.

    Effective regulation relies on a sensible, easily understood rule book and regulatory staff who really understand financial services and how institutions operate. FSA had neither. Their 'principles based regulation' is a nonsense. The Bank of England will have to try really hard to do worse. FSA RIP.

  • Comment number 51.

    23. At 7:56pm on 13 Jun 2010, Kevinb wrote:
    21

    As far as pensions go, the main problem with any state provision is that it doesn't grow, in other words, there is no investment element

    It is also completely unfunded

    Your NI payments this week, go to Mr Jones to pay his state pension next week

    Due to longer life expectancy, it is a timebomb, and all governments from the mid 1970s onwards have been grossly negligent in doing nothing to deal with it

    The situation is not going to get any better any time soon

    -------------------------------------------------------------

    True now. Not sure it was always that way. In fact, I have a vague notion of having seen a breakdown of investments held in NI fund at various times past. Think the first raiding occurred in the 1980's but cannot be certain about that: subsequent raids have taken us to the position outlined above.

    Time to scrap NI and save money on staff and offices.

    PS: Had GB been really smart he would have sold BoE gold to NI Fund.

  • Comment number 52.

    47. At 10:43pm on 13 Jun 2010, John_from_Hendon wrote:
    KevinB

    You have clearly lost your marbles.

    1. The context in which the first post was written was that you and others were advocating debt forgiveness and the retention of the secured assets by the forgiven debtor. Why would you want this unless you have a personal reason for doing so as it is entirely illogical and will destroy banking and capitalism?

    2. The only logical explanation for wanting debt forgiveness is that you have debts that will be forgiven and you will gain from the implementation of this absurd idea - something I have put to you and you have refused to deny.

    I rest my case. I have you bang to rights. Now agree that people who borrow must pay back their debts - which you have failed to do on several occasions.

    I am sorry, you are completely wrong

    1.I have no personal debts other than my mortgage, which is at a rate unobtainable now, for it's lifetime

    2. I do not, and have never advocated debt forgiveness as you call it, you are confusing me with someone else

    3.I do also wish you to apologise for calling me a bigot, which I am not

    As I have never said that people who borrow should NOT pay back their debts, I see no reason for confirming something that is an illusion in your head

    Now, you admit to making assumptions, incorrect assumptions, about matters which are very personal, and then you went on yesterday to suggest that I sought medical attention, as you had never written that I had personal debt problems

    Now you at least confirm (as per the above) that you said it

    As I have confirmed that both your assumption, and reason for making the assumption are incorrect, please now apologise for the remark and apologise

    If you are interested, my mortgage is 0.49% above BOE for life

    Instead of paying it off, I am better making my money work for me

    You are most welcome to disagree with my opinions, yet the comments about personal debt, in my view, cross a sacred line

  • Comment number 53.

    50

    You are right

    The law and regulation should be black and white where possible

    Principles can be and very often are, bent and twisted

    We also need some regulators who actually understand the products they are regulating, that might help

  • Comment number 54.

    51

    Always been true I am afraid, you might be thinking of SERPS?

    NI has never been invested

    The ratio between those working, and those retired is known as the support ratio

    It is getting worse

    Mind you, in Japan it is throttling the country utterly, so it could be even worse!

  • Comment number 55.

    Does this new "Committee" mean another Quango type drain on resources or just a ploy to pretend that the independence of the Bank of England is gradually being brought back under Government control? Ah well! Perhaps that the advisors should be on tap and not on top.

  • Comment number 56.

    3. At 5:56pm on 13 Jun 2010, stanilic wrote:
    The problem with Gordon Brown's tripartite system of regulation was, as you in imply, that it left nobody in charge. This need not necessarily have been a bad thing if the then Chancellor had possessed the imagination and the political capability of calling a stop to the insanity of the financial markets. We now know that he lacked the necessary skills to make that and other decisions.


    I think he was simply blinded by the huge tax take he got from the banks by turning a blind eye to their reckless risk-taking to fund his reckless spending and credit expansion policy.

    You could be right, of course. His "there will be no more boom or bust" proclamation was pretty naive especially when we could see the bubbles starting to inflate everywhere (while he couldn't): total personal indebtedness reaching £1 trillion should have warned him. But he was known for a mouth in top gear with his brain in neutral. "British jobs for British workers". A recovery of 0.2% giving cause for "huge optimism". "I'm saving the world."

    Then, of course, he whipped the public up into an anti-banking frenzy, blaming the banks when things collapsed. Of course, he was no part of it at all, oh no!

  • Comment number 57.

    My head started to swirl half way into Mr Peston's blog, maybe it's the effect of those awful SA horns that are ruining the world cup, but one word did spring to mind.....fudge

  • Comment number 58.

    It's a good decision. The BofE regulated the British arms of banks fairly tightly. Once the banks got their exposure reporting computerised, the BofE could get weekly, bi-weekly, monthly and annual reports covering all aspects of banks' assets, liabilities and exposure.

    The BofE credit rated banks, largely to determine the limit of overnight overdrafts. Bad banks had a low limit (£20,000,000 or so), better ones, higher. It was the limit to which a bank was allowed to be in the red without paying huge interest rates (and getting a demand from the then governor to turn up for afternoon tea). Being invited to tea by the BofE was a nasty warning to banks' Chief Executives.

    The BofE also set levels of capital adequacy which were very much higher than in the past 15 years or so.

    So it's a good decision.

    I hope the BofE can regulate mortgages a lot better than some notorious banks could self-regulate. More, though, it should prohibit trading of financial instruments for which it can't calculate the risk or fails to understand. I'd also like to see it stamp on banks borrowing short term on the Money Market to fund long-term lending. There was a time when the Money Market existed to allow banks to balance their books of a day. I'd like to see it return to that.

  • Comment number 59.

    Which one organisation would you trust with your entire life savings eg pension fund?
    1) The state funded national pension scheme which has the necessary government controls to stop the dawn raids on every bodies cash.
    2) A private insurance company or any other financial instrument you care to choose eg endowment (crap performance), private company pension (gone bust), unemployment insurance(the next big scandal). Lets face it the financial services industry has a pretty poor record of performing for your average Joe. Yet they perform well for private shareholders does that not tell you something?
    Out of the two I would go with option 1), just on track record its more secure than private schemes.The last 15-20yrs have provided that with all the mis selling complaints and the get out clause being this investment is not guaranteed it may go up or down please seek financial advise!

  • Comment number 60.

    A couple of fairly major points which need consideration.
    1)Would anybody ever trust the financial services industry again?
    2)Would you trust them with your entire life savings eg your pension pot?
    3)Knowing what we know now about endowment policies would you consider that another mis sell?
    Some things are too important to trust to the private sector :
    1)Is the health service which needs to benefit everybody not just a few.
    2)Your entire life savings eg your pension contributions.
    3) You could argue that a persons main residence is also important eg a roof over your head so may be the interest charged on this should be regulated too (first property or main domicile).

  • Comment number 61.

    Though these proposals have merit, they ignore the fact that there is still no UK body responsible for the investigation and prosecution of financial services crime. The Office of Serious Offences and Commercial crime are not up to this specialised task, and are over-worked anyway.

    It would make sense to leave the Financial Policy Committee of the BoE to monitor banks, with all the powers of the FSA presently, and to convert the FSA into a body responsible for the invetigation and prosecution of financial services offences.

  • Comment number 62.

    Would it be irresponsible of me to call the whole thing a Ponzi scheme.

    I'm hiding my savings under my bed, where at least it it will accumulate some dust.

  • Comment number 63.

    62

    Only irresponsible if anyone will be influenced by your opinion

    Otherwise, just inaccurate

  • Comment number 64.

    re #51 & #54
    I stand corrected. But the money coming in in the '60's must have been vast and payments out considerably less. What happened to the spare dosh?

    I have this recollection of something like the London Gazette in the 1970's and 80's listing pages of stcoks held by HMG. What was this for? Was that not pre the SERPS raid?

  • Comment number 65.

    Just who is "an independent" supposed to be dependent on?

    We now have a "fiscal watchdog" with political strings attached. How does that help anyone when there is already a lot of concern that public spending cuts will throw the UK into a tailspin?

    How about someone cutting the **** and acting for the majority of UK people? Is that so hard to do? New Labour managed it over Northern Rock, morally, if not for the right financial reasons. Has the Coalition the right equipment between at least two of its four legs to act for the vast numbers of UK citizens that are being played as pawns in this power game?

  • Comment number 66.

    The problem with regulation is that there is always a conflict of interest at the heart of it. Take for example the Treasury’s joint paper with the Asset Management industry on the future of that part of the economy. Undoubtedly this was kicked off under a Labour Govt but the aim is likely to remain. The Govt want a strong asset management industry and, in particular, the creation of an “onshore “hedge fund industry.
    The FSA’s retail distribution review has included a much wider range of products in its definition of those included in independent advice. This would include hedge funds which currently, in the main, are unregulated collective investments. This is probably not that necessary for the safeguarding the public or their need to have truly independent advice – but it does apparently serve the Govt’s interest.
    It is probably not possible to remove such conflicts; however we do need a regulator which has more independent input from the industry and the public. As far as I am aware consumer and industry representatives are chosen by the regulator. We need a little democracy in regulation to create a regulator who can stand up to the Govt.
    The worst outcome is the existing people and culture simply re-badged in the Consumer Protection Agency on one side, and the old FSA building a theifdom inside the BoE on the other. The danger is that a FSA subsidiary will neither be answerable to the BoE or the treasury – so much for clarity George!
    Whatever the outcome, Osborne must ensure that our regulatory regime is both operationally and cost effective.

  • Comment number 67.

    #52. Kevinb wrote:

    "As I have never said that people who borrow should NOT pay back their debts"

    That is at least an improvement.

    DO You Understand Interest Rates?

    Now, do you actually even understand the importance of using interest rates and of the centrality of interest rates in clamping down on all domestic inflation.

    This (as you should know by now is my argument against the Bank)is why the bubble was so pumped up in the last decade, when those people you protect beyond all reason, the Bank of England and its Governor, got it so baldly wrong and ignored house price inflation.

    Do you acknowledge that interest rates were too low for the last decade and that this allowed the house price bubble to cripple the Nation's personal debt profile fro the next generation?

    (A number of things may be seen as to flow from this bad decision by the Bank as I have indicated many times before.)

  • Comment number 68.

    64. At 09:10am on 14 Jun 2010, Up2snuff wrote:

    re #51 & #54
    I stand corrected. But the money coming in in the '60's must have been vast and payments out considerably less. What happened to the spare dosh?

    I have this recollection of something like the London Gazette in the 1970's and 80's listing pages of stcoks held by HMG. What was this for? Was that not pre the SERPS raid?
    -------------------------------------------------------------------------

    In the interests of informed debate,would those interested in discussing the issue of the National Insurance Fund please look up the excellent Wikipedia entry on the subject? Some of the previous posts on the matter have been pretty misleading.

  • Comment number 69.

    #46. Kevinb wrote:

    "Why is it, John from Hendon, that you have referred my comment?"

    I didn't!

    I am more than happy to continue to point out your many deficiencies in understanding the tools in the arms cupboard of economic monetary management, e.g. the critical importance to economic stability of maintaining secured loans and the centrality of interest rates as the only tool to moderate bubbles in the money supply. Your half knowledge is a very dangerous thing.

  • Comment number 70.

    #52 Kevin wrote:

    "If you are interested, my mortgage is 0.49% above BOE for life"

    So you now confirm that it is directly in your personal interest that interest rates are kept insanely low. Which confirms what I have been saying about you bigoted slant on economics all along.

    So from your own words you will be very hear hit indeed if interest rates returned to rational levels of 5% - what is what I have been saying about your posts. In short you don't give a hoot about the country you are simply pursuing personal self interest! So rather than being wrong about you as you claim so often I am in fact absolutely right!

  • Comment number 71.

    #58. doctor bob wrote:

    "I hope the BofE can regulate mortgages a lot better than some notorious banks could self-regulate. More, though, it should prohibit trading of financial instruments for which it can't calculate the risk or fails to understand."

    From their past history I not only share you fears, but also I fear that as it is to the Government's benefit (as it was for the last Government's) to fudge the inflation figures and ignore blatant money bubbles and inflation that further economic disaster will directly from from this decision. I am of this opinion because of the history of the people in the Bank of England. If the Governor was so spineless or blind as to ignore inflation in the past is it very probably that he will not change his spots!

  • Comment number 72.

    How about, wild shot in the dark here, they stop banks lending so many times over what they actually have, and remove their cartel privileges? Crises are built into our the structure of our system, so all this faffing around really is pointless.

  • Comment number 73.

    I see that growth forecasts and business confidence surveys are starting to crash - despite all the very clear indicators of recover up to this point.

    As predicted months ago - you threaten millions of people with redundancy and they stop spending. You take billions of pounds of public contracts off private business and the business goes bust. You will have another recession, just as we were quite clearly coming out of the last one ..... double dip.

    Three million unmeployed by Christmas?

    Well done Bertie Wooster.

  • Comment number 74.

    One question....

    WHO WILL PAY FOR ALL THIS?

    The move to within the BoE structure may seem very insignificant - but does it now mean the FSA will be funded by the taxpayer and not the fees it currently charges it's members?

    The whole idea of regulation is a joke, the banks lobby to get regulations reduced and use the wealth they extract from our production to do so. Then they collapse through the weight of their own greed - and guess who bails them out?

    That's right folks - whichever way you cut it - you end up paying. This is why the real wealth of the British citizen is in decline - only the 'fictional offsetting' that bubbles produce (like the housing bubble) - give the illusion of increasing wealth.

    House prices will start to decline as unemployment rises - or stay the same - then the British public are going to feel a whole lot poorer.

    I mean how many 'house millionaires' are there out there? Not wealthy through hard work and effort - but through the speculation of others.

    As a large number of people in Britain have lived the last 15 years of Hubris off the back of their house rising in value - there are going to be a lot of unhappy people around for the next 10 years or so.

    Never mind though - at least the fantasy will be over and we can go back to being 'real' as a country and not the 'fame and fortune driven fantasy land we're currently living in.

    I mean did anyone really expect that the world's production per person would grow so quickly that we can all be millionaires?

    Absolute madness.

  • Comment number 75.

    There is one aspect to financial regulation that seems to be slipping under the radar, the big accountancy firms. Who will regulate them? They operate like a lobbying cartel. Just the other day I heard one of them touting for Government business in regard to the probable slimming down of Whitehall. They made a fortune in consultancy fees from the last Government, are they going to be allowed to get away with it all over again? Regards, etc.

  • Comment number 76.

    It's all very well, as you say Robert, "In other words the Bank of England would have ultimate responsibility for banking regulation and supervision as the "owner" of the reconstructed and slimmed-down FSA."

    I'm far from convinced these reforms will prevent the likes of a great financial crash happening again. The last one was unthinkable, in the minds of the bankers, regulators and the various political elites. A handful of academic types and the odd business leader were saying something could go horribly wrong, but were ignored.

    All we seem to be changing here is who we can blame next time around.

    The real question is next time around how strict should we be about letting the banks go bust and refusing bailout? If we can't muster the courage to let banks go bust then we should re-construct our banking system in such a way that if one or two banks, and their directors, choose to run their businesses incompetently that it does not take the whole industry down. And preferably that the owners of the banks do not have their interests limited to just losing the value of their shareholdings. If this industry is soooo important to the UK a special case should be made for, just, bank shareholders having Unlimited liability. So bank bosses lose not just shares, but their houses their shirts, everything in a financial collapse! In other words make bank owners, not the regulator responsible! (After all why should we subsidise bankers if we can't subsidise others?)

  • Comment number 77.

    trouble is the lunatics are in charge of the asylum
    ie regulation of financial industry is done by industry insiders whether from BOE or FSA
    perhaps what is needed is some outsider input, mixing financial "experts" with people from industry. I am sure engineers could make a better job of risk assesment or in fact any intelligent person from a non financial background.

  • Comment number 78.

    @ 112. At 11:28am on 09 Jun 2010, John_from_Hendon wrote:

    >> #99. newblogger wrote:

    >>"Why can't we fully nationalize RBS and LLoyds?"

    > and the City of London would declare independence!

    Is it really that easy to get rid of "The City"? It's not a bad idea,
    actually. Put all the national debt into "The City", and then float it out
    into the English Channel!

  • Comment number 79.

    64

    Sorry, can't help with what you saw in the paper, nothing to do with pension though

  • Comment number 80.

    67

    No apology then.....

    I am unable to write what I would like to

    Words fail me

  • Comment number 81.

    70

    What rubbish

    You are simply wrong

    Why would I pay off my mortgage when I am paying 0.99% when I can make much more than that by investing?

    You really are unable to grasp any concepts beyond the fact you don't like Mervyn King, and would like to join the Euro

  • Comment number 82.

    Despite the complex issues that surround finance,most of the banks products are for consumers. whether that be mortgages,loans or advice.

    Sales of Goods Act,Supply of Goods and Services Act etc, goods must be 'fit for purpose,description and of satisfactory quality'.
    I would have these type of products under the usual Trading Standards, with appropriate adjustment to suit the claims/dispute amount.

    Amalgamation of much of FSA,FSCS, and other bodies work with the existing Trading Standards structure, and keep a small, but highly specialised forensic accounting office with the BOE for the complex interbank,government,etc financial instruments.

  • Comment number 83.

    This isn't the only change the coalition has been making quietly. Over the weekend they dumped plans to make landlords sign up to a body to try to regulate them.

    Apparently, in these times with increasing numbers of renters due to the huge number of reposessions, and with landlords finances getting tighter and tighter (well at least they will when rates start rising) - the coalition doesn't think this will affect the service the renter receieves or increase the likelihood of landlords cutting corners to save costs.

    I suppose it could merely be pandering to the middle classes as so many of them are now 'accidental landlords' - and they don't want the bother and fuss of actually doing the job properly! Either way it spells bad news for renters - who will be on the increase over the next few years.
    In my experience, ex-homeowners have much higher standards than renters who have never owned.

    Still, in order to help the Economy along the coalition has decided to can all those housing projects - not so bad for the Treasury - but they didn't really think about the effect it would have on the floored housebuilders did they?

    http://news.bbc.co.uk/1/hi/business/10304456.stm

    Alas, the new build market is currently being supported almost totally by Government contracts - someone needs to whisper "aggregate demand" into little George Osbournes ear...

  • Comment number 84.

    68. At 09:44am on 14 Jun 2010, haufdeed wrote:
    64. At 09:10am on 14 Jun 2010, Up2snuff wrote:

    re #51 & #54
    I stand corrected. But the money coming in in the '60's must have been vast and payments out considerably less. What happened to the spare dosh?

    I have this recollection of something like the London Gazette in the 1970's and 80's listing pages of stcoks held by HMG. What was this for? Was that not pre the SERPS raid?
    -------------------------------------------------------------------------

    In the interests of informed debate,would those interested in discussing the issue of the National Insurance Fund please look up the excellent Wikipedia entry on the subject? Some of the previous posts on the matter have been pretty misleading.
    ------------------------------------------------
    ------------------------------------------------
    Unfortunately, it is possible for Wikipedia to be wrong more than some other encyclopedia.

    A quick squint at Wiki sends us all backwards so the recollection stored on my two brain cells is a tad more accurate than that on kevinb's three. But kev and I will raise both eyebrows to stratospheric levels at the claim that the fund is a) producing a £2bn surplus, and b) that surplus is likely to grow in future ...

    'T'would be nice, of course ..... er no, in fact it would be GREAT!

    Hey, let's be careful again out there, today.

  • Comment number 85.

    84

    Wikipedia.....you are correct...

    Some of it is just loo roll

  • Comment number 86.

    84. At 1:43pm on 14 Jun 2010, Up2snuff wrote:
    But kev and I will raise both eyebrows to stratospheric levels at the claim that the fund is a) producing a £2bn surplus, and b) that surplus is likely to grow in future ...
    -------------------------------------------------------------------------
    Follow the links in the article if you want more info. Don't just rubbish it because it doesn't fit in with your preconceptions. And if you still disagree with the article after checking out its sources, then please share the detail with all of us- tell us precisely what is wrong with it. Not too much to ask, is it?

  • Comment number 87.

    86

    Look, NI has never been invested, that isn't my opinion, or my recollection, it is a fact

    So, I don't need to look it up to know that

    IT IS WRONG

  • Comment number 88.

    85. At 2:43pm on 14 Jun 2010, Kevinb wrote:

    84

    Wikipedia.....you are correct...

    Some of it is just loo roll
    ---------------------------------------------------------------------------

    Ahh- the cut and thrust of reasoned debate, the clash of fine minds, the rapier-like wit. It is truly a privilege to share any forum with such a towering intellect.

  • Comment number 89.

    88

    Most intellects must look towering from your perspective

  • Comment number 90.

    89. At 4:11pm on 14 Jun 2010, Kevinb wrote:

    "88

    Most intellects must look towering from your perspective"

    Sounds like experience counts for a lot.

  • Comment number 91.

    I have done with "financial advisors" they are a law unto themselves, the FSA has failed miserably to protect consumers but it has been very successful at protecting the city.
    What does that tell you?, well as proven many times before any organisation that investigates itself has the power to cover wrong doings up and white wash any incident.
    The city hates regulation stops them making money, but it obvious to many consumers now that they are being fleeced left right and centre.Its one thing regulating but its another thing enforcing! Take for example the use of mobile phones while driving. But we are talking about peoples life savings here, huge mortgages etc. If these financial bodies make a mess of a complete families life then they should go to prison. In the same vain as a robber going to prison, theft is theft be it at gun point or by other more subtle means!

  • Comment number 92.

    Keith

    You are clearly an angry man......

    If you have a genuine complaint, follow it up

    Otherwise, I think we have got the message that you don't like the city

  • Comment number 93.

    86. At 2:46pm on 14 Jun 2010, haufdeed wrote:
    84. At 1:43pm on 14 Jun 2010, Up2snuff wrote:
    But kev and I will raise both eyebrows to stratospheric levels at the claim that the fund is a) producing a £2bn surplus, and b) that surplus is likely to grow in future ...
    -------------------------------------------------------------------------
    Follow the links in the article if you want more info. Don't just rubbish it because it doesn't fit in with your preconceptions. And if you still disagree with the article after checking out its sources, then please share the detail with all of us- tell us precisely what is wrong with it. Not too much to ask, is it?
    ---------------------------------------
    ---------------------------------------
    Nope. Read it. As I posted I find it hard to believe that NI contribs produce a £2bn pa surplus and this is estimated to go on growing - presumably at current contrib rates.

    Trapped in the fluff somewhere between my two brain cells is notion that, relatively recently, NI contribs came in front door and went straight out back door on NHS, pensions and benefits.

  • Comment number 94.

    92. At 5:33pm on 14 Jun 2010, Kevinb wrote:
    Keith

    You are clearly an angry man......

    If you have a genuine complaint, follow it up

    Otherwise, I think we have got the message that you don't like the city.
    -----------------------------------------
    I would say about 80% of the population feels the same way.
    Please bear in mind that millions of families have now been saddled with debts probably for generations and the city still seems to be stuck with the attitude that its all there fault.
    Incentives in the form of bonuses created this mess along with the fractional reserved banking business model. You cannot blame ordinary families for that.The city has harmed itself by the working practices.
    And I have just been reading the article on BBC news about the Office of fair Trading, basically they are DOING NOTHING or have no plans to tighten up the regulations about pawn brokers and excessive interest being charged. So ask yourself this who are the OFT protecting?,the families caught in this recession no change that slump or the businesses that exploit people in a bad situation?

  • Comment number 95.

    Forgot to add the link here it is ;

    http://news.bbc.co.uk/2/hi/business/10316235.stm

  • Comment number 96.

    Reading the proposals, I have great difficulty believing that this Government understands the existing landscape of financial services regulation.

    The proposed division of responsibilities amounts to this:
    - Prudential Regulation Authority (part of the Bank of England) -"conduct prudential regulation of sectors such as deposit-takers, insurers and investment banks"
    - Consumer Protection and Markets Authority (not part of the Bank of England) - "will regulate conduct of authorised financial firms providing services to consumers, including retail and wholesale financial services"

    Regulation is not just a matter of prudential regulation on the one hand and regulation of conduct on the other. There is nothing in the statement as to which body will deal with the process of granting authorisations, deal with incoming and outgoing applications to passport under the EU financial services legislation and send representatives to sit on the European Banking Authority, the European Securities Markets Authority and the European Insurance and Occupational Pensions Authority (which are replacing the CEBS, CESR and CEIOPS respectively).

    The reference to the Consumer Protection and Markets Authority as regulating "conduct of authorised financial firms providing services to consumers, including retail and wholesale financial services" seems to ignore the fact that much of the conduct rules applying to financial services entities are not about protecting consumers but counterparties and the market as a whole.

    The only meaningful change will be that the Consumer Protection and Markets Authority/renamed FSA will lose its powers of micro-prudential regulation to the Prudential Regulation Authority/Bank of England.

    Given that the detail of micro-prudential regulation is set out in the European financial services legislation I query how much scope there is for the Prudential Regulation Authority to act in the area. The statement by the Government that "[Financial Policy Committee] will have the power to require the new Prudential Regulation Authority to implement its directions by taking regulatory action with respect to all firms" is necessarily qualified by the fact that the Prudential Regulation Authority can only act within the framework of the applicable EU financial services legislation. The Prudential Regulation Authority will have, as the FSA currently has, some limited flexibility over how it regulates those institutions that are established and regulated in the U.K., but only within the framework of the applicable EU financial services legislation - it will be the referee but it cannot change the rules of the game. EU financial services legislation is particularly comprehensive in the area of prudential regulation - ironically, because of a concern that giving any significant degree of discretion to member states would lead to some member states having lower prudential standards and banks in those member states, in conducting cross-border business in other member states under the EU passport, would be advantaged relative to banks established in those other member states. In addition, the Prudential Regulation Authority will have no powers of micro-prudential regulation over financial services entities established in other EEA countries that passport into the U.K., just as they did not over Icelandic banks Glitnir and Landsbanki.

    Of course, the Government may intend, in the legislation implementing its proposals, to go outside the terms of EU financial services legislation, but in doing so it would run two risks. First, that the EU Commission would bring infringement proceedings against the U.K. Secondly, that financial services entities currently established and regulated in the U.K. would migrate to other EEA member states and conduct their U.K. business cross-border from that other EEA member state or using a U.K. branch. There have already been a number of U.K. insurers that have moved their head offices and jurisdiction of regulation to other EEA member states.

    It interesting that from the FT today there appears to no great support for what is being proposed by the Government:
    http://www.ft.com/cms/s/0/44832732-7a01-11df-9871-00144feabdc0.html

    As this article in the New Statesman yesterday points out (http://www.newstatesman.com/blogs/mehdi-hasan/2010/06/mervyn-king-bank-committee%29, the Bank of England, and in particular the Governor Mervyn King, failed spectacularly in 2007/2008 in carrying out the one task for which it is currently responsible, conducting monetary policy. Perhaps that failure should first be analysed and addressed before giving the Bank of England wider responsibilities.

  • Comment number 97.

    Yes no doubt employing na sayers when things go wrong or even worse, the back hander masonic gentlemens club that just keeps thing to themselves at the expense of people who really care. Typical. Why do we have idiots govering us? Because they only look after each other!

 

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