New macro-prudential regimeThis article has nothing to do with some cheap supermarket from the continent or the huge boo-boo dropped by our erstwhile esteemed insurance group chasing a far-eastern continent. But it is about a regime. More specifically a change of regime.
There was a body known as the FSA. It was full of nice chaps who had a lovely long sleep whilst Northern Rock glibly handed out 125% mortgages on the back of a fag packet and whilst the likes of HBOS purchased high-yielding wholesale bundles of debt that was not something it pretended to be. So, the new UK Coalition Government has decided to do away with the FSA, or rather, break it into bits and put most of it within the Bank of England for future safekeeping.
In simple layman terms, what is the objective for the economy? The answer is to attain a much more steady supply of credit. It might all take until 2012 and it might merely place the nice chaps in different slots but if that objective is achieved, it will have been worthwhile. Three cheers for the coalition. No need to read further. The rest, which sets out the new regime, is boring. Though not as boring as the FSA used to be.
There will be a Prudential Regulator. Chaired by the Governor of the B of E, it will take over responsibility for supervising individual banks and other financial firms. The body will be a direct subsidiary of the B of E.
A Consumer Protection and Markets Authority will be formed to regulate the conduct of every authorised financial firm providing services to consumers.
The existing Monetary Policy Committee of the B of E will be twinned by a Financial Policy Committee that will have the tools and the responsibility to look across the economy at the macro issues that may threaten economic and financial stability and the tools to take effective action in response.
The crime attacking wing of the FSA will be merged with those of the Serious Fraud Office and the Office of Fair Trading. The target of the single policeman will be serious economic crime.
JGS - 17 June 2010
