BBC BLOGS - Peston's Picks
« Previous | Main | Next »

Bankers more confused

Robert Peston | 14:24 UK time, Wednesday, 8 July 2009

For bankers and insurers today has in some ways been maddening, because in a way they are further from knowing how they'll be regulated in a year's time.

Because there is now a very clear difference between the policy of the government and the policy of the Tories.

And if the opinion polls are to be believed, it's the Tory plan that'll be implemented after the next election.

Which means that the Bank of England will become a lot more powerful.

As I mentioned in a recent note, the shadow chancellor George Osborne will create what's known as a Twin Peaks regulatory system (or a version of it), with the Bank of England monitoring financial risk at banks, building societies and big insurers.

A new consumer and markets regulator would replace the Financial Services Authorities. It would be responsible for making sure financial firms conduct themselves in ways that don't damage their customers.

For those running the FSA right now, this is a pretty fair old nightmare - because it will make it pretty difficult for it to continue the process of upgrading its staff through recruitment over the coming few months (why would you join a regulator that's being dismantled?).

By the way, some of those running the FSA would argue that a flaw in the Tory approach is that in separating prudential supervision and what's known as conduct-of-business regulation, it would be harder to assess risk in the round at any particular bank or insurer.

A big bank can end up being very badly damaged by selling the wrong stuff to the wrong customers. But under the Tory proposal, responsibility for keeping an eye on that wouldn't rest with the re-empowered Bank of England.

As for Mervyn King's disappointment that he hasn't won the right from the current chancellor for the Bank of England to go into banks and demand relevant information, some bankers had been somewhat alarmed at the notion that they might have had to report to two separate regulators (though they'll certainly have to do a bit of this under the Tory prescription).

Surely if the governor asks the FSA nicely enough, it'll supply him with the information on specific banks that he'll be wanting in the weeks to come.


  • Comment number 1.

    Lord Turner should resign. He is now clearly seen by the public as a lackey to our unelected prime-minister. The correct and effective agency for holding the banks to account is the Bank of England rather than the FSA, a toothless product of Brown's 'no more Boom & Bust' philosophy.

  • Comment number 2.

    The FSA paid themselves £m in bonuses recently. Why not the uproar? We can't really say they did their jobs well.
    A Tory government should listen to the Public but I certainly believe the old system was inadequate and Mervyn has been a lone critic of recent bail outs, so I vote for him. Moral Hazard anyone?

  • Comment number 3.

    Did anyone really understand Twin Peaks when it was first broadcast?

  • Comment number 4.

    'A QANGO by any other still a QANGO'
    Why do we need to replace the FSA. Surely it would be more prudent to give the FSA the powers that they need to fulfill their jobs.
    As for the Bank of England, under the governmentship of Mervyn King, it appears to be the only organisation in the City of London that is being honest with the British public.
    Unless this new QANGO has the power to enforce its will against the high-powered financiers in the city then it will fail. They will simply find a way to avoid their responsibilities.
    After all, if things start to get difficult, they can always offer a few lucrative directorships around the Palace of Westminster.

  • Comment number 5.

    So will the Council for Financial Stability be in addition to the MPC. Will it just hold the coats while the three players slog it out. Where does the Government come in to orchestrate economic and fiscal policy or is it another example of New Labour stepping back from active management of the economy, etc etc. One certainty is a good opportunity for City boys to get another lavishly remunerated sinecure. Am I confused? - ex Labour parliamentary candidate losing the will to live!

  • Comment number 6.

    In the interests of balanced reporting on the issue,its background and what others say ( rather than the turf war you keep mentioning between BoE and FSA / Tories v Labour) why does the BBC not refer to the recommendations of the House of Lords Select Committee on Economic Affairs Banking Supervision and Regulation Report dated 2 June 2009? It thinks executive power should be given for macro prudential regulation to the BoE working through a Financial Stability Committee. It concluded that the Tripartite Committee system failed us ! It concluded the BoE should have adequate institution-specific information to function effectively.

  • Comment number 7.


  • Comment number 8.

    The proximity of an election (unlike in the USA) means that the uncertainty generated may well create catastrophic instability in the financial markets in the UK between now and the election.

    These politicians (of all colours) MUST already know this so why are they setting out to further damage the country?

    I am also left staggered by the Tories as much as the incumbent conservative (called Labour) party. To me is seems that both parties have a death wish and are determined to take us all with them. The incumbents wish to bequeath a terrible situation to their successors and the present opposition are doing their best to make the situation when they gain office as bad as possible? Where is the sense in all this!???

    You feel that someone needs to take these fools aside and read the riot act to them all!

  • Comment number 9.

    GB - Ed, Ed, look at this bloke King trying to blackmail me into giving him more powers.

    Ed - Don't worry PM I'll fix him, the boys in the office have some nasty stuff to leak about him!

    GB - But he's trying to rubbish all my pet projects like the FSA.

    Ed - We can put Yvette on Newsnight, the public like her.

    GB - What about the Chancellor?

    Ed - Cypher will do whatever we tell him, don't worry.

    GB - OK Ed, your my bestest mate you are. Tell me again the one about going to see the Queen amid cheering crowds after an election.

    Ed - Alright PM, just sign-off these expenses claims first.

  • Comment number 10.

    A year of uncertainty is not a remedy for economic recovery or stability in the markets.
    Britain seems stuck in the frozen position, like the petition calling for crash to resign on Number 10 Downing Street's website

    Brilliant!" enthused Homer Simpson about Twin Peaks.
    "I have absolutely no idea what's going on!"

    Well said Homer... even Google fails to inform.

  • Comment number 11.

    Much of this multi-layered 'regulation' used to be unnecessary. And why? - because there was an active policy of managing the money supply through the mechanism of interest rates (and loan rationing). This worked well and could work well again.

    If the price of money was a lot higher then individuals and organisations would take more care of it and this would solve the problem!!!! (and indeed our present slump would not have occurred!)

    We need sound money that it sensibly priced (at lest 5 percent today!)

  • Comment number 12.

    How about a few words on the previous employment of the FSA staffers? A signifiant number had ties to Barclays. Isn't this a too cosy old-pals arrangement? It stamps of musical chairs with our money. Even though, as you say, George O would rid us of FSA.

  • Comment number 13.

    This is just another example of the chaos being caused by a failure of our democracy and its political and economic institutions.

    If Gordon Brown had an ounce of decency, he would respond to the obvious will of the people and call a General Election now. Whilst the Tories may or may not make a better fist of running the country (I have my doubts), at least uncertainty would be removed and we'd all have at least 4 straight years to try and get the country back on its feet.

    As it is, the United Kingdom now exists in a form of limbo or paralysis whilst sliding inexorably towards bankruptcy and ever diminishing world status. All the while, the unelected Gordon Brown and his unelected cronies hang on to office for grim death. How can all this possibly be in the best interests of the nation? It's a measure of Brown's utter delusion.

    The Labour Party really does deserve to be despatched to oblivion for creating such an unholy mess of our country.

    I'm 52 years old and have seen a few things in my time, but I've never experienced such a catastrophic collapse in the country's morale. My military experience tells me that one of the first duties of a leader is to foster and maintain high morale. Does anyone seriously believe that Gordon Brown has the personal and/or political skills to lift the morale of the nation?

    Unless/until a true leader emerges from this crisis, the portents for this country are not good at all.

  • Comment number 14.

    # 8 John_From_Hendon

    I had not seen your post before I posted my own at # 13.

    Fascinating that our views are so similar. One wonders if our political elite (ha!) are in any way connected to the thoughts, ideas, views and wishes of the ordinary citizens of this country.

    Looking at what's happening in Westminster and Whitehall these days, I remain convinced that our politicians are good and truly away with the fairies.

    Whilst the stability of our economy is already seriously threatened by this government's incompetence, the continuing detachment of our political elite generally from the mood and thoughts of the nation does not bode well for the stability of our society in the coming years.

  • Comment number 15.

    In a proper legal context the bankers would be in jail for stealing untold amounts of funds from individual's accounts but because they are cozy with the ruling class, or are the ruling class, the suggestions are that they be placed on probation and report on their activities. They are compaining that we may put a lock on our safe that makes it more difficult for them to steal.

  • Comment number 16.

    The issue is not really who should do it but the risks involved in who should do it. The danger is regulatory capture, and certainly the evidence in the Northern Rock case is that is exactly what happened. Whether the Bank would avoid this is questionable, since traditionally it has been the spokesperson and the 'savior' of the City.( all those life boats!) Would it not be captured by the zeitgeist of the moment, while trying to balance its responsibilities of inflation control and a lender of last resort? Does anyone believe that the FSA people would not just move to the Bank?

  • Comment number 17.

    The word "FSA" should be removed from the English language, the sooner the better.
    Thousands in the City have become filthy rich, at the very least on a morally fraudulent basis, and millions of us have had our future ruined.
    "Confusion" has become Westminsters' speciality.
    Whoever "takes the reins", let us ensure that they are not "greed merchants", and that they know what they are doing.
    And we must ensure that, unlike the FSA, they are not "influenced" by the "greed merchants".
    If you add up all the Citys' "profits" take away the trillion pound loss, and what's the answer? "Wealth creators"?
    "Protection for the public" is required.
    George Osborne sounds good, it's a shame that we have to wait.
    Mervyn King makes the most sense to me.

  • Comment number 18.

    for no 8 But do the Tories expect to gain office. Maybe they seek a 'Government of National Unity' as their best hope as a result of some serious polling. The won't join GB's

  • Comment number 19.

    Bank regulation should be seen as a second club for the control of money supply and should be wielded by whoever wields the first club, the bank rate. In return for state guarantees for their depositors funds, banks should be required to adjust their capital ratios as instructed by a new version of the MPC. This would probably be best done from within the Bank of England because it is really an extension of its existing responsibility for literally printing money.

  • Comment number 20.

    I will believe Mr Darling or any other politician on this issue, when a Bill is introduced barring ex-Ministers and senior Civil Servants from accepting paid remuneration from any financial institution for a period of five years after leaving office.

  • Comment number 21.

    Re:A consumer-orientated/driven new 'FSA',in other words.

    Q1:Why ''consumer-driven''?
    A1:Because they use the products.

    Q2:What do consumers want?
    A2:Low interest rate credit.Easy access to money to spend.

    Q3:When do they want it?

    A ''Wash and GO'' system ?

    Where is the independent/objective thinking going to come from,when needed ??

  • Comment number 22.

    One more time......

    They have to stop securitising Loans and Mortgages !

    Banks can raise money by issuing Bonds secured on themselves, they do not need to actually sell Loan and Mortgage Packages between themselves !

    Remove the Securitisation and you remove the Salesmens chance to pass the Buck.

    Simple really or just Really Simple.

    This Depression is getting really depressing !

    Low or zero pay rises mean low or zero growth in Consumer spending.

    Stagnation continues.

  • Comment number 23.

    17: It's not just peoples futures that look shaky.

    Many people have lost their present too.

    No one has yet addressed the surge in spreadbetting (buying/or selling on Margin) websites.........

  • Comment number 24.

    It seems clear to everyone but the banks that they need to be controlled by an organisation that understands banking, The Bank of England.
    It also seems the FSA is out of it's depth in the insurance industry. How is it monitoring the industries willingness to underwrite risk sensibly, rather than on the back of a fag packet.
    It's not, quite simply.
    Insurers are thinking of a figure and halving it chasing market share and at the same time increasing commissions paid to National Brokers and larger and larger consolidator Brokers, who call the tune but don't have to pay claims. The tail wagging the dog.
    It's the next property market crash waiting to happen because they aren't taking enough premiums in to meet catastrophe risks.

  • Comment number 25.

    Securitisation (It never went away)

    Re-Remics anyone ?

    Jack, jack, jack, jack your (lifeless economic) body....

    If the slaves want power - it must be taken.

  • Comment number 26.

    Can someone who is advocating the comlpete handover of the control of the countries financial decisions to the BoE please explain why they think this is a good decision for the people.

    Even the control they do have, they mismanage and have shown incompetence or worse? It would be better that the issuing of interest rates should also be taken from them along with their monopoly of printing 'fiat' currency and then lending it to the government 'at interest' in exchange for government bonds which the bank then uses as capital, multiplies tenfold via the scam of 'fractional reserve lending', loans out the result and again at interest.

    Why doesn't the government print it's own money and then at zero interest?

    The BoE are unelected and therefore unaccountable to the people. Why would they have the peoples interests at heart over and above the legally elected parliament?

    Two very famous quotes come to mind at this moment in time:

    1. Permit me to issue and control the money of the nation and I care not who makes its laws

    2. I care not what puppet is placed on the throne of England to rule the Empire, ... The man that controls Britain's money supply controls the British Empire. And I control the money supply.

  • Comment number 27.

    Since early this year HMRC have instructed brokers to add Stamp Duty to purchases of some 330 UK Sterling Corporate Bonds I can find nothing in the Finance Act that authorises this. The Government appears to be acting illegally and putting up dealing costs by 0.5%. This could destroy the UK bond market but few people seem to be aware of it and no financial journalist appears to have the nerve to comment on it. Come on you lot are you all asleep at your posts!

  • Comment number 28.

    #8 John_from _Hendon
    # 14 moraymint
    Both of you are sensible folk who live in the real world, unfortunately the vast majority of "powers that be" with the exception of Saint Vince Cable do not.

  • Comment number 29.


    Stuart Rose gets 60% of shareholders vote. How much of that is banks/pension funds etc holding shares in nominee accounts where they have the voting rights? Since the Big Bang being a shareholder doesn't mean you have voting rights. That goes to the people in Financial Services holding your pension fund or shares for you.

    In fact, this would make for a very good series of articles on how a minority of people can get control over the economy by going into the Financial Service Sector....

  • Comment number 30.

    No new regulator can possibly do any worse than the Financial Services Authority (FSA)- an unelected, uncontrolled expensive quango that has 100% failed in every element of financial services regulation in the UK.

    They missed Equitable Life and all of the banks who were trading bankrupt and fraudently in front of their noses. The FSA spend too much time on the small players in the financial services market (fishing for minnows) whilst the big players fail to treat their customers or shareholders fairly. The FSA are a disgrace - the Bank Of England cannot do any worse than the FSA.

    It is no prblem for the FSA staff - they will all get jobs with the big banks anyway (as we saw with Crosbie of HBOS).

  • Comment number 31.

    Another great plan to be implemented " after the election "; in the disastrous event of Labour being re elected, it will take about ten years to get the deferred "till after the election " legislation through parliament. This is another example of a dying government making policy on the hoof in the knowledge that it will never have to implement it but hoping that it may look as though they are in fact competent in government,when in fact they are the epitome of incompetence. There is no possibility of this government making any meaningful policy while it is in the position of knowing that it's leader has lost all of the respect of the people and is going "through the motions " but achieving nothing.

  • Comment number 32.

    People seem to have forgotten the reason why the current Chancellor originally proposed transferring the supervisory responsibilities for banks from the Bank of England to the FSA. (It was Mr Darling who as an opposition Treasury spokesman who proposed this in the early 1990s.) The Bank had just shown itself to be utterly incompetent in its regulation of BCCI, a bank whose failure did not result in the current deposit protection arrangements because its retail depositors were primarily from the Asian communities.

    When the FSA took over responsibility for bank regulation on its creation in 1997, the staff who had done the job at the Bank of England just transferred across to the new organization. It is not very surprising that the FSA ended up in the same mess as the Bank of England before it. Changing the identity or label of the regulator will not alter anything. It never does. One can compare the DTI regulation of Equitable Life with the FSA's. There was very little difference.

    Moving deck-chairs around is good for egos. What is needed is different people sitting in them. None of the political parties has any proposals to ensure that. To be fair, the FSA is trying desperately at present to change its staffing arrangements in this area although this seems to be at the cost of any meaningful regulation of other areas of retail investment business.

    In short, though, people should not call for the return of bank regulation to the Bank of England without reading Lord Bingham's damning report on its mis-regulation of BCCI.

  • Comment number 33.

    Re 32 ComplianceAdamSamuel
    Yes, fair point about BCCI.
    However the BOE controlled the banks successfully for a century with very few glitches.
    In 10 years the FSA have wreaked havoc and almost busted the country, not by good control, but by lack of it.

  • Comment number 34.

    Message 14 moraymint

    Please do not blame the faeries, the Good People, the lusbarten or whatever they are known. We are dealing with human frailty here; not that of the Wee Folk.

    British history since the war has been a story of management failure. This is yet another episode on the way towards our eventual renaissance. We need to flush this cultural poison out of our system. As you and I fear we will be very hard up before that happens but that sadly has to be part of the recovery story.

  • Comment number 35.

    Utter utter shambles

    The tripartite system was discredited, too many cooks etc

    So what does darling that financial genius do?

    Create yet another Quango 'The Council for Financial stability'

    So thats 4 differnt voices all potentially pulling in different directions

    Is the man the agent of a foreign power do you think?

  • Comment number 36.

    The effect of tighter regulation is to reduce the turnover and thus the profits of the banking "industry".

    Too great a turnover and the government, us, steps in to bail out the bankers when it all goes pear shaped.

    Too little turnover and the money supply is not there to support the real economy. Result - the government has to step in and again we support the real economy as well as the bank workers that were laid off through their firms profits disappearing. We all get into greater debt.

    Caught between a rock and a hard place?

    What a great system we live in.
    Oh - I almost forgot. The bankers will be making money whatever happens. It is what they do..

  • Comment number 37.

    Separate retail banks from casino banks and let the casino banks fail when they take unacceptable risks. Don't allow securitisation and limit the size of all banks. Ban all bank bonuses - these come from our money!

    I think you could then do away with the FSA altogether.

    To cheer everyone up in these miserable times, here are some copyright free downloads. I recommend 'I am Changing my Name to Fannie Mae' and 'George W told the Nation'

  • Comment number 38.

    Once again we look to believe that experts can manage experts. If Mr Osbourne would like to read The wisdom of crowds (James Surowieki) perhaps he would then understand that "experts" only mimic "experts", the very reason all fund managers generally perform the same. Understand that expertise and accuracy are unrelated meaning that such regulation would be as poor as ever. Lets face it every expert about today only knew what to do after it went wrong, until the first signs nobody actually mentioned it. Again Mr Osbourne (George not Ozzy) probably wants just to look and talk tough, I doubt whether his banker friends would not council him against making things too tough for them in the future. Perhaps Ozzy would! Maybe there is a chance in the future that regulation could include the "wisdom of crowds", it certainly looks a better bet and could probably be done for very little cost.

  • Comment number 39.

    Hasn't the time come for GoBro to put the interests of the Country ahead of the interests of himself and call an election. Then at least everyone knows where they are for the next 5 years.

  • Comment number 40.

    Confused, who isn't confused with this labour government.

  • Comment number 41.

    The banks are never confused when its about the business of ripping off customers and paying themselves obscene bonuses.

  • Comment number 42.

    Please, please Mr Unelected Brown, the best thing you can do for this country, that you are so passionate about, is hold a General Election ASAP.. It's time for us all to move on...

  • Comment number 43.

    #32 ComplianceAdamSamuel and #33 stevewo

    You can't compare what happened with BCCI and Equitable Life to the crisis we have now. What has occured this time is total systemic failure....not just of the entire banking system, but of the FSA and tripartite system as well.

    ...and in the wake of all that's happened, we have this pathetic response from a pathetic government. Yes, it truly is rearranging the deck-chairs on the Titanic.

    There's a laughable GB quote in the last sentance of the last paragraph in the attached article from 2005...

    Brown actually refers to the FSA as "world class".

    He just couldn't make this stuff up...could he?

  • Comment number 44.

    All those lifeboats mentioned above were evidence of effective management of a serious problem. That approach would probably have prevented the run on Northern Rock. However, it wouldn't have been able to withstand the knock on from the US and elsewhere. What is needed is greater simplicity e.g. how much are you lending by sector, how much are your deposits from that sector, how much provision have you made for loss .... Although Banks are big and complicated what they do is fundamentaly simple. The more bodies involved in supervision the less likely there will be someone prepared to cut to the chaff.
    K.I.S.S. = BOE the FSA have simply created paper mountains at great expense.

  • Comment number 45.

    Its a bit of a quandary because ideally a regulator would be totally objective and immune to the lobbying powers of the financial institutions they oversee. Unfortunaely in order to have a complete understanding of what those institutions do they will have to have worked within the industry, thereby already creating a conflict of interest as can well be seen in the US where Goldman Sachs is practically the last man standing of the wall street securities houses in no small part to the fact that they have former executives in high positions in the Treasury, Fed and SEC.

    I am no lover of Gordon Brown, but lets just remember that the Banks in Japan have been propped up on artificial respirators for fifteen years by the taxpayers there, now the same is true in the US, Ireland, Iceland The Benelux, most of Eastern Europe as well as many other countries around the world.Only the ascetic calvinists of the Dominion of Canada remained immune to the possibility of raking in huge piles of dough by trading in 'stuff' that they didn't actually understand. Yes, we have been hit harder than most because of our utter dependency on financial services to grow the economy, but if some of you could only be a little more objective you would see that this crisis really is a failure of global capitalism, not actualy caused by the British Labour Party,they had as much chance of stopping the wheels coming off as Nigel Mansell in Adelaide 1990 (for all you F1 fans out there)...

  • Comment number 46.

    High street consumer retail banking MUST be seperate from the casino banking of "investment/hedge/futures" banking.
    Mortgage self-declaration of income and high multiples of income MUST be stopped.
    Interest rates must be higher to ration borrowing and increase flow of money into the UK.

    We must reduice reliance on "financial services" and manufacture more-more competitively
    The FSA was setup by Gordon Brown and is still toothless: dubious packaging of dubious products must be only undertaken by companies that can be allowed to go bust if they fail.
    The BoE is well-qualified to run these regulatory constraints-not a Chancellor who wants to create a false sense of wellbeing to win elections.
    Public expenditure must be cut now, borrowing reduced by higher taxes NOW!!!
    Canada did this years ago, and is the best-placed economy as a result.

  • Comment number 47.

    #45 CityGambler

    Yes you're right about the Japanese banks but you should also point out to readers that Japan also still has Sony, Panasonic, Honda, Mitsibushi and a host of other important industrial companies.

  • Comment number 48.

    Will the Tories when they get in nationalise RBS and Lloyds, with Barclays and HSBC moving to the US and running down some of their UK operations?

    If the Tories carry our what they propose and keep King in place, King will require substantially more capital in the banks judging from all his populist pronouncements, which is highly unlikely to be provided by the institutions, given the likely poor performance of banks which will be required to hold more capital and lend more to less credit worthy businesses (afterall King has said more capital is needed to lend more and absorb losses-why should our pension funds provide this capital throwing good money after bad, given that they have lost so much already).

    Therefore the Government would have to step in and nationalise those banks which could not escape the UK i.e. Lloyds and RBS.

    So we could see a new Tory government nationalising two of the major UK banks, shortly after coming to power, with the other two major banks fleeing the UK!

    How to inspire international and domestic investor confidence - not.

    Given King's incompetence and poor judgement for example in setting interest rates, forecasting what's happening in the economy and being slow to react to the liquidity crisis, if more power is given to the BoE, King should be replaced with someone more competent and better able to understand the consequences of their actions.

    Otherwise we will have an even bigger mess.

    By the way does Osborne give anyone any confidence that he knows what he's doing, and is not just jumping on bandwagons? I am beginning to wonder whether the Tories will be as bad as Labour.

  • Comment number 49.

    Is there anything more to discuss really? We are ALL being had in a massive fraud thats lasted for centuries.

    Time to wake up!

  • Comment number 50.

    J_from-H in #8 and Moraymint in #14...
    What you both say makes sense and I'll sign up to the party any day.

    The idea that a kind of statis from now until next May (or at some earlier point when Lord Mandelson tells GB he MIGHT JUST win)---- can be sustained, is a delusion.

    Everything about the direction of the government has echoes of Chamberlain's premiership in the 30's and 40's----- NOT doing anything in the 30's didn't just leave us unprepared for the war that caused it; as the inaction not only failed to deter the agressor, it encouraged him.

    Once the war started there was no aggressive action and direction, just more drift throughout the phoney war... until the German strike and the whole rickety edifice collapsed in a couple of weeks.

    The question for us is whether Lehman Brothers was the Blitzkrieg across France, and the main hammerblow....or just the invasion of Poland...which means the present few months are a kind of phoney war as we drift listlessly waiting for that real blow to fall.

    I fear the real world collapses we are seeing are depressing portents of that 'blow yet to come'... ...see Teesside where as well as the Steel industry about to collapse, as Corus struggles to find a future for 2,000 workers; now even chemical companies are foundering as well....

    Far from these being 'lagging indicators' of a passed crisis, they are, and bad as they are,just the fallout of the opening shots.... the effects of the people losing jobs, and even more having wages frozen---and reduced---- play into the vicious spiral now beginning to swirl strongly around this country.

    Yet all we hear are platitudes and empty gestures of initiatives that are of no significance.

    As was said by J-from-H...the interest rates should go up to encourage saving NOT continue with this futile attempt to encourage virtually bankrupt people to spend our way out.... and , getting back to the non-event of 'Banking regulation' , just investigate the Bank executives in the same way as the Americans are investigating Stanford, Madoff..and indeed, as we are the MG/Rover 'deal'.

    There aren't incorporeal essences at the heart of this disaster--there are people who turned a blind eye to things they must have known were unsustainable---the rest of us did, and just like Madoff did.

    They did it because they knew that the salaries and remuneration were so high that even a total collapse or the sack wouldn't affect them.

    The palsied debate going on at present is encouraging the bankers to return to business as usual because they see no will or competence to deal with the issue.

    It's feeble and a disgrace.

    Chamberlain's government...? It's more like a re-run of the pathetic government of Louis XVI in France before the revolution, fractured,incapable, feckless, distracted and simply unable to function; in the face of the gathering pace of events they simply disintegrated.

    If anyone gets this far (which I doubt) I'll end by saying....BOY..! Am I glad I got that off my chest ...again!!!

  • Comment number 51.

    To all those who are wondering why so many people feel the FSA cannot be counted on to do any sort of decent regulatory job, while the Bank of England stands a much better chance, and indeed should be at the heart of a new 'compact' for our financial system (with help from new laws forcing greater disclosure, separation of activities, and size limits for banks), there is one simple explanation.

    The FSA has been totally and very effectively captured by the organisations it is supposed to have been regulating.

    Just look at the people who have been serving on it's board!

    Look at the rather embarrassing list of bankers who have messed up badly in their own organisations, or who have worked for organisations in very dodgy tax havens, before being appointed to be our fine "regulator"!

    It's laughable, and I would not trust an expanded FSA or another politically appointed quango in future to do anything different.

    On the other hand the track record of the people at the Bank of England on the whole does not show such subservience to the banks.

  • Comment number 52.

    There are always fortunes to be made in war, conflicts and confusions.
    Confusion? No, opportunities for spin and playing off Labour and Tory against each other for the best deal.

  • Comment number 53.

    Whoever wins the long-awaited election next year is immaterial. It's the banks that are running the country and it's the banks that have taken democracy hostage, again.

    The best way to regain any kind of decent future is to be as independent of banks as you can possibly be, whether the BoE or the FSA are left appearing to be in charge at some vague point in the future. We can't sit around waiting for some knight in shining armour to rescue us.

  • Comment number 54.

    # 50 e2toe4

    Yes, I have maintained the view for the past year or so that everything we are seeing at the moment is the build up to economic collapse not the end of it.

    Even today we learn that the Bank of England intends to print yet more money. Ostensibly to support activity in the real economy, but in fact all they have been doing is buying government debt. In other words a snake eating its own tail. The country is heading for insolvency whilst our political elite play student politics and focus on saving their own skins.

    Even now, the majority of the UK's population remains blissfully ignorant of the socio-economic disaster that looms ahead. In essence, a vast number of individuals, businesses and state organisations will run out of cash in the coming year or so. Credit remains in famine.

    The impact of all this is difficult to define in detail, but we are poised to enter a period of social turmoil borne of the economic catastrophe that is this Labour Government's legacy.

    Hold on to your hat; the rough ride is about to start.

  • Comment number 55.

    This all sounds like change for change sake.
    It will cost us millions to dismantle the FSA and create a new body that will have the same people running it. I haven't got a solution but "better the devil you know" comes to mind.

  • Comment number 56.

    In my simplistic view of life there are two aspects to the whole financial debacle.

    1. Stop the banks including the old Building Socs from getting involved in spurious dealings. In short to stop them becoming beholden to the tax payer again. This would be best achieved in the way of a "supervisor" who recommends a course of action and is part of a dialogue. Not by a dictatorial approach. This role is suited to the central bank.

    2 Ensuring that the financial institutions are not ripping off the customers. In this would include payment protection, bank charges and all other interactions with the public.

    The other pieces of the Tri/quad partite role would then be unnecessary. The money saved could then be used to beef up the regulation to ensure we customers are not being ripped off.

  • Comment number 57.

    So the Opposition disagrees with the Government - wow! The quickest way to clear up any uncertainty would be an Election now. With the economy likely to be heading for a second dip, this may even be in the Labour Party's interest.

  • Comment number 58.

    I am inclined to agree with those readers who write in to say that they believe Mervyn King, who's traditional integrity and background as a well respected banker, suggests he better understands the reckless manner in which the city banks are being run and how best to rein in city bankers's greed. In that respect it would be sensible to give him overall responsibilty for ensuring that city banks and other financial insitutions are better controlled and regulated.

    Except for the fact that city banks are always trying to evolve and at a much faster pace than the BOE whose "modus operandi" might well have better stood the test of time but those tried and tested methods are probably not dynamic or flexible enough to take account of the speed of change that occurs in city banks especially.

    There is a world of difference between trying to run an entreprenurial style business with the minimum of corporate governance as opposed to managing a business that is very well organised and a model of corporate governance.

    The simple fact of the matter is, banker's don't try to manage their bank's they just run them with the minimum of corporate governace. Whereas the BOE is a well managed insitution employing high levels of corporate governance.

  • Comment number 59.

    53. At 06:21am on 09 Jul 2009, starry-tigger wrote:

    "Whoever wins the long-awaited election next year is immaterial. It's the banks that are running the country and it's the banks that have taken democracy hostage, again."

    Well, sadly, I agree with you. Stephen Green of HSBC let the cat out of the bag the other day by stating that, in fact, globalised big banks can't go bankrupt, or go into administration.

    That means 1) the Government HAD to bail them out (no options) and 2) that means that big banks are in a win/win situation.

    Basically, they're gambling BIG TIME with a jolly nice taxpayers 'safety net' protecting them from the worst consequences of getting it wrong.

    How cushy is that?

    Until regulators and lawmakers change that ballgame, bankers will carry on much as usual.

    Changing that alone would substantially put UK banks into a whole new ballgame.

  • Comment number 60.

    Robert - Not only the banks need proper regulation. All large corporations do.

    Take a look at the web site allaboutnorteldotcom

  • Comment number 61.

    It seems that Merv is confused also, how does buying corporate and government debt stimulate an economy?

    Serious question folks, I cannot see this working.

    'But it may announce an extension of its quantitative easing scheme under which it prints money to buy bonds in order to stimulate the economy. '

  • Comment number 62.

    Re: The theme that we ain't seen nothing yet... and that the straws are in the wind, looking at the story about the Nationwide's 125% mortgage offer (Motto: "Don't worry because the people we will offer this to aren't alcoholics..they can handle it").

    The rates of interest to lock in are 7% and over--the Bank of England Rate is being kept at the delightfully mythic rate of 0.5% ---well mythical for anyone looking for a loan, delightful for Banks justifying the meagre interest they pay out.

    Each of this kind of successive news stories simply re-inforce the idea; the correct idea, that nothing is being done, the head quarters are empty, the only policy is one of drift------

    Why didn't someone from the Treasury just ring up Nationwide and tell them that the Enron test will be applied from January 1st , so they can go ahead and offer these products and sell them to people but the senior managers and executives, down to their branch managers and sales people will each be liable to be held personally responsible under any Civil Actions from people who may find themselves unable to repay these loans... 90% LTVs are exempt from this, but 90% and above are not: AND make this news known to the branch managers, call centre managers, sales people and people processing the loans as well .

    Then propose the legislation and argue for it....---- that's leadership, and if the country violently disagrees the leader proposing it could fall, and the legislation with it....thus validating the perception of Public Opinion in feeling 125% LTVs are perfectly fine.

    I know where my money would be on the result.... and given personal responsibility all down the line at Nationwide as a condition then
    a) There would be more internal debate on the circumstances of EVERY loan above 90% LTV
    b) Lower down the scale even counter staff would need the same relative sized 'bonuses' to be made to them, as compensation for the very real risks being run; that are made to heads of department,Head Office Execs and Board level Executives.

    Which would be a good thing in itself and please all those apologists for the Banking system who are constantly distressed when the subject of capping bonuses arises...'Because MOST people in the Banking and Finacial services systems are paid very lowly and the bonuses are necessary simply to keep body and soul together....'.

    Now they'd require hefty bonuses to process a possible civil action case, giving consumers a chance to have the money recycled back,but more importantly make the decision making process within the Bank (Building Society) far more difficult to fudge..... maybe remote managers would even find their 'consumer facing staff' actually looking into borrower's repayment history, ability to repay, and all other factors that (used to) go into assessing whether or not the Borrower was a "Good Risk" (as opposed to the assessment in recent years where it was sufficent that they were a 'Risk'---a state achieved by at least 100% of all borrowers) .

    Maybe those remote managers would be DEMANDING their staff did this 'Good Risk?' assessment; in order to protect THEIR own position in the chain of liability, in what would be a new game

    Of course it might mean they all opt for the safe option and only ever grant Mortgages on 90% LTVs....

    Crumbs!...THAT would obviously cause untold disaster; 'Risk taking' in our marvellous economy becomes curtailed, untold damage may probably can't do it then..Oh hum!!

    I AM only joking... at least I think I am!!

  • Comment number 63.

    The other side of this bungled regulatory reform is the back drop of a general election.

    Reform could have meant freedom of information enquiries on government controlled banks revealing how banks do their day to day business including the administration of party political donations.

    Now that kind of reform isn't something that was ever going to happen in the run to a general election is it?

  • Comment number 64.

    @48 whatevernext1 wrote:
    "does Osborne give anyone any confidence that he knows what he's doing, and is not just jumping on bandwagons? I am beginning to wonder whether the Tories will be as bad as Labour."

    I would put my money on Cameron et al repeating the Heath Government - try the right, quite painful medicine for 12-18 months, followed by severe loss of nerve.

  • Comment number 65.

    'Banks more confused'...what a load of tosh! Vince Cable commented about this...

    'There will be champagne corks popping all over the City this afternoon. The chancellor's statement proves that it really is business as usual'

  • Comment number 66.

    Robert lets look at the facts, Meddlesom, Bonkers, Dreadful & Bananas are at best treading water and at worst dead men walking.

    The handicap with the present proposition is that for banks they are in no mans land as well as their sole function is to look after themselves and develop legal circuitous routes to legally avoid specific legislation.

    With no legislation in place they are stuffed so will spend the next year finding new escape clauses to carry on as before.

    Whether the FSA claims the Tory plan is not one thing or the other is as irrelevant as they have become, the facts are unassailabe the FSA havent a clue on anything and 'upgrading their staff' who have never done a real job is a singuarly fatuous exercise.

    It would help if they looks at the excessive rules they have in place which leave more questions than answers and sorted out their own management and staff turnover before lecturing anyone on how to run a business. Lets not forget their 'stress testing' of the banks was a common joke which Roberto Calvi would have passed!!

    The Bank of England was and is classically the only correct line of regulatory control to adopt and we should ignore any bleating to the contrary.

    To give the FSA any participatory involvement is insane and the present suggestion by Dreadful is more to do with old pals sticking together than generate any benefit to the public at large.

    Why this great country is being run in this shabby manner is sheer madness and the fact that we still have to wait another 10 months till real action can take place to the overal detriment of this country's reputation and financila futre is surreal and best and teh height of irresponsibility at worst.

  • Comment number 67.

    Moraymint has a good point (post 13) out of its disaster (and it is worse than ours) came a true leader which the people could love and follow. I am sure that Obama makes a real difference because of the person he is (unlike GWB)

    Where is our Obama?

  • Comment number 68.

    32. I'm not convinced that the problem is one of the split in responsibilities between the FSA and the BOE, particularly as the financial ombudsman who deals with the manifest problems that the general public experience on a day to day basis appears to be disconnected from the regulator. For example as part of an insurance dispute in 2004 I was told that a subsiduary of Bradford and Bingley had been sold and that the problem was nothing to do with B&B any more. Both their accounts and their announcements to the stock exchange inferred that the subsiduary had been sold for 6 million despite B&B having bought the company a few years earlier for in excess of 100 million.
    when I investigated the accounts I found what had actually be sold was the name and some software and in fact the company was in fact still owned by B&B But they had changed the name of the company in a complex series of internal transactions which was used to give the impression of growth in the main banking business.I asked the financial ombudsman if they would take action against B&B only to be told that this was nothing to do with them and that this was an FSA responsibility so whilst my insurance dispute was resolved the ombudsman had no process for engaging the FSA and no action was taken on what I believe was a deliberate act to mislead share holders and the stock exchange.
    My expeirence suggests that unless directors of banks are held liable for their actions in law there is no moral hazard that will stop the manipulation of lax accounting rules and reckless risk taking.
    The accounts of the banks need to be published in much greater detail and the accounting rules on asset valuation stengthened so that they represent fair value in the event of a bank collapse.
    ultimately what we need is more transparency of risk and a mechanism that limits the ability of banks to create long term debt on the basis of short term deposits from the money markets.

  • Comment number 69.

    Words fail me.

    Will they never learn? When did excessive consumption get resolved by incresing consumption?

    Do they seriously think that the solution to the over-priced asset of a house is to simpy treat the inflated price as the 'real' price?

    Debt slavery anyone?

    No wonder bankers are confused - the Government is confused and the people are confused.

    ...and after those towers of Babel fell the people were in confusion..

  • Comment number 70.

    A total shambles all round-most Bank Directors should be facing prosecution rather than more bumper bonuses.Someone somewhere should be reminding these Bankers that they are now employees of the public.
    The problem with the FSA is that it has never understood any part of any section of business that they should be regulating.If anyone not in the insurance business, had ever attended the FSA Seminars on Treating Customers Fairly they would instantly realise why the FSA stumbles to find the front door never mind wrongdoers.Lord Turner clearly does not understand the problem with pensions as evidenced by his recent nonsensical pronouncements [from the shelter of a wonderful pesnion option] and he and Mr Sants should be retired immediately.

  • Comment number 71.

    67 - I think it might be a little early to judge Obama - just not being George W is a great start but it's probably worth judging after a few years (we keep saying about everything else we need to see long term benefits well the same will need to be said about his tenure in office - he's not actually achieved much yet...)

  • Comment number 72.


    Your having a giraffe surely?

    Obama is a puppet for the bankers and the privately owned federal reserve, he will do no good and in fact has already broken many election promises.

  • Comment number 73.

    A contribution to the Credit Crunch?

    Hopefully this may promote transparency and debate in our 'Open Society' and steer some off 'The Road to Serfdom'.

  • Comment number 74.

    All banks are gambling houses and those who run them are gamblers being in a bank used to give people the idea that their money was safe as many did not know how they work. The house always wins so the banks did not need bailing out they should have been allowed to go to the wall new ones would have come up to replaced them but now we have few huge banks who will call the shots. The Govement knew about this and Blair did a runner because he did not want to be blamed for this and Brown wanted to be leader but he is not and Cameron wants to get in there and make life worse for everyone but his ilk, there is no difference between any of the parties they are all tarred with the same brush, and even those who did not join in knew about it but once the bankers have you well not easy to get out look at the USA which is robber baron ridden Britian learnt all it know from them. But there is a much darker side to this which is were is all the money? like Madoff not in the USA like Maxwell not in the UK we have to know who rules the banks in this country and thus the bankers they do not care as its about wealth with them. And how are we bailing out companies that are owned by other countries and then allowing them to asset strip and put people out of work with no pay then the media like the BBC make out that its those peoples fault and they have to change and what? we now have a huge amount of young men out of work and in debt so what will there be for them join up and kill those who did not do this to them like before.

  • Comment number 75.

    Horned_Devil (#71) "I think it might be a little early to judge Obama"

    Indeed. He could well be a good man, but what really matters ar ethe tendrils of power behind his throne. The USA is not a dictatorship ;-)

  • Comment number 76.

    it's certainly too early to judge Obama. I do believe his intellect and persuasive powers will help him (and america) to move the US economy out of the recession that GWB allowed the US to get itself into. We need to remember that this mess was caused by light touch (some might say no touch) regulation both in the US and UK, on the respective watches of Bush and Brown. Obama needs the nation behind him to push through policies which make a difference, and Brown just needs to go, soon please!

  • Comment number 77.

    rzw300 (#76) "Obama needs the nation behind him to push through policies which make a difference"

    As I have said repeadely, that's the problem they have already made a mess of the USA's demographics, just as New Labour and their anarchistic predecessors have done for the UK and the EU. It's the (differential) birth rate....

  • Comment number 78.

    The FSA, like the BBC, are unduely influenced by Mr Brown and his flawed policies. Much better to give Mr King who obviously tells the truth and has more experience of deal with banking issues the full responsibility required to get this discredited industry back to some sort of integrity and honesty in business dealings.

  • Comment number 79.

    My fear is that we'll be the only nation who seriously look at long term regulation- and that in turn will impact upon the outlook for finance in the square mile.

    Regulation is extremely important- or rather, effective regulation. However, if we have learnt nothing from this crisis surely we must be clear that regulation requires a global outlook and a global solution.

    If we merely become distracted by the BofE/FSA debate we may lose sight of the bigger picture. Where is the global consensus on regulation? Where are the preventative measures across borders? Mutual agreements and cross - jurisdictional monitoring?

    Effective regulation in only one country (and I still believe we are some way off this in any event) must be matched abroad like-for-like, or the finance sector will simply de-camp from London at a time when we need the tax revenue most.


BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.