Whatever we call it, let’s have financial stability
The Tories wanted the tripartite of financial regulators scrapped. Alistair Darling has done it. It will now be called the Council for Financial Stability. And given more powers.
The chancellor was hardly going to kill the child he and Gordon Brown created when they ran the Treasury after Labour took office in 1997. The triangle of the Bank of England, Treasury and their new Financial Services Authority was intended to ensure Britain’s financial system remained strong.
The banking crisis exposed the failures of making three bodies responsible: they all blamed the others when something went wrong. But rather than bow to shadow chancellor George Osborne’s demand to scrap the tripartite by stripping the FSA of its job as banking supervisor, Darling has changed its name and made the regulator more powerful.
That is a snub for the Bank of England, which in a public power play tried to pinch back from the regulatory role of supervising banks that was taken away in 1997 after the Bank had allowed BCCI and Barings to fail.
But renaming the tripartite rubs in the insult. Darling’s white paper on regulatory reform proposes that what is currently called a standing committee re-emerges as the Council for Financial Stability – with the same three members.
This secretive body that currently meets on an ad hoc basis will now publish minutes of regular quarterly meetings. Darling will be chairman and bankers’ pay will be top of the first agenda.
This is of more than academic interest. This council will oversee the banks that are currently failing to provide vital finance for British companies. It is monitoring a sector that has so far absorbed £50bn of public funds that the taxpayer will never see again (on top of the far greater sums that it hopes will be recouped).
And if George Osborne does become chancellor he promises to undo this re-arrangement of the deck chairs, possibly creating sufficient confusion to allow the next bank to overextend itself.
Surely the financial crisis is so severe that some all-party support for a common solution makes sense?
