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Uk Banking Act To Boost Fsa’s Role


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HOLA441
UK banking act to boost FSA’s role

Posted by Gwen Robinson on Jun 26 05:02.

UK chancellor Alistair Darling is planning a new Banking Act this year to strengthen the role of the Financial Services Authority, in an unexpected move that follows criticism of the Bank of England’s failure to warn of the impending banking crisis. Darling wants to give the FSA a new statutory objective of maintaining financial stability, a function currently entrusted to the Bank. Legislation to be introduced in the autumn would enable the FSA to question a bank’s practices and order it to change.

http://ftalphaville.ft.com/blog/2009/06/26...oost-fsas-role/

and

BoE furious after Chancellor tries to beef up FSA's regulation of the banks

Hugo Duncan Hugo Duncan

26.06.09

The Bank of England was seething today after it emerged that the Government is planning to strengthen the role of the Financial Services Authority in banking supervision - an area currently entrusted to Threadneedle Street.

Chancellor Alistair Darling wants to make the FSA legally responsible for maintaining financial stability in a new Banking Act, depriving the Bank of some of its authority.

The move is thought to be a response to the perception that, although the Bank did warn of the impending financial disaster, it did not shout loudly enough.

It underlines the extent of the damaging rift between the tripartite authorities - the Bank, the FSA and the Treasury - which culminated this week when Bank Governor Mervyn King attacked the Government's failure to hatch a plan to reduce its ballooning debts and complained he has not been consulted over new legislation.

The comments infuriated the Treasury and an unnamed Cabinet minister today accused King of forging an "unholy alliance" with the Tories who favour scaling back the role of the FSA and transferring power to the Bank.

Peter Hahn, a fellow at Cass Business School, said: "The politicians are taking sides. One party is for the FSA and the other is for the Bank."

The Bank was given responsibility for financial stability when the tripartite system was launched by Gordon Brown in 1997.

King wants new powers to enable it to carry out its responsibilities, such as being able to go over the head of the FSA and force banks to increase capital.

But Darling believes that as City watchdog the FSA should not only regulate individual banks but also ensure that the combined impact of their business models is not dangerous to the financial system.

Legislation to be introduced in the autumn would give the FSA power to question how banks operate and order banks to change their business models if they appeared to be destabilising the system.

http://www.thisislondon.co.uk/standard-bus...anks/article.do

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HOLA442

Ha, a widening rift appearing between the Boe and Government ... that won't do much for financial stability will it.

To be fair to him IMHO King has been making the right noises recently whilst the idiots in Downing Street lurch from self inflicted crisis to self inflicted crisis.

Next to Zimbabwe the UK can't be far off the political and economic laughing stock of the world.

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HOLA446
Ha, a widening rift appearing between the Boe and Government ... that won't do much for financial stability will it.

To be fair to him IMHO King has been making the right noises recently whilst the idiots in Downing Street lurch from self inflicted crisis to self inflicted crisis.

Next to Zimbabwe the UK can't be far off the political and economic laughing stock of the world.

It appears that King is realising he has the ascendency and is no longer willing to be Brown's gimp. I think he knows in under a year this idiot will no longer be PM.

It will certainly be interesting watching Brown saying he'll be increasing spending if he wins with King saying fiscally that cannot happen.

I wonder if we will soon see open criticism of govt policy soon from King rather than subtle hints.

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Legislation to be introduced in the autumn would enable the FSA to question a bank’s practices and order it to change.

i thought that was the whole point of a regulator. Regulator doesn't like what your doing, regulator has the power to force you to change.

or maybe they should change the name of the FSA to the FRA....the financial regulatory authority, so that no-ones in any doubt as to the power they hold or intend to have.

Unless ofcourse they want to remain toothless, in which case they aren't regulators. Perhaps there's been a misleading of the role of the FSA by the treasury since the beginning.

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This sounds like it has more to do with childish point scoring than financial stability.

I see the hand of the Gobbler in this more than that of Darling.

He wants to slap King for making him look bad and cares nothing for anything else.

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i thought that was the whole point of a regulator. Regulator doesn't like what your doing, regulator has the power to force you to change.

or maybe they should change the name of the FSA to the FRA....the financial regulatory authority, so that no-ones in any doubt as to the power they hold or intend to have.

Unless ofcourse they want to remain toothless, in which case they aren't regulators. Perhaps there's been a misleading of the role of the FSA by the treasury since the beginning.

the concept of having regulator bodies isnt for your benefit, they make it look like that but in reality is for the benefit of business.

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The logical thing to do is to simply make the FSA subordinate to the BoE. This way, the BoE calls all the shots, while the FSA are responsible to the BoE (who are in a position to judge) rather than the Treasury - where there would be (are) inevitable conflicts of interest.

Edited by A.steve
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FT Editorial on this:

Mr King is right. Financial stability policy would ideally be able to contain City euphoria without cooling the whole British economy. But that will sometimes be impossible; someone, somewhere, will need to weigh economic and financial priorities against one another. Given its role in moderating the real economy through monetary policy, the Bank is the only institution that can judge the options.
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This sounds like it has more to do with childish point scoring than financial stability.

I see the hand of the Gobbler in this more than that of Darling.

He wants to slap King for making him look bad and cares nothing for anything else.

It looks a bit like that, not that the BoE have much to crow about, but the FSA has been a complete waste of time.

Such 'I'll show you' petulance is no way to run a country.

The government are an absolute joke - the trouble is the joke is on us.

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