UK government moves to resolve supervisory turf war
In his long-awaited banking white paper published today, UK Chancellor of the Exchequer Alistair Darling has attempted to draw a distinction between the tripartite authorities, creating a Council for Financial Stability to promote better co-ordination of financial supervision.
The 176-page document, Reforming financial markets, comes after weeks of speculation about an escalating turf war between the Bank of England (BoE), the Treasury and the Financial Services Authority (FSA), which were given specific responsibilities for financial supervision and policy in 1997 by then-Chancellor Gordon Brown.
"The framework of 1997 established the FSA as the single regulator responsible for supervising all financial institutions, and gave the Bank of England responsibility for contributing to the maintenance of the stability of the financial system as a whole. This replaced the old system of several different bodies all acting with different powers and legal authority," wrote Darling. "New arrangements need to be put in place to strengthen the co-ordination of the authorities generally, including formal and transparent evaluation of the risks identified by the BoE, and assessment of the necessary actions that need to be taken."
The paper extends the FSA's power to set rules whose purpose is the protection of financial stability, and gives it a mandate to gather information from unregulated institutions such as structured investment vehicles to determine whether they pose a threat to stability.
As for the Bank of England, the Treasury wants to enhance the value of its biannual financial stability review (FSR) so that it points out systemic risks to the UK financial sector and economy, recommends specific actions needed to counter those risks and suggests whether those actions should be implemented by the BoE, the FSA or the Treasury.
While co-ordination between the tripartite authorities is currently addressed by a standing committee, the Treasury wants to create a Council for Financial Stability in its place. Chaired by the Chancellor, it will include representatives from all three authorities and will meet regularly to discuss systemic risks identified by the FSR or the FSA's annual financial risk outlook and actions needed to address them.
On the subject of systemically important financial institutions, or those considered too big to fail, the Treasury said they should be subject to tougher regulation and higher capital requirements, with the FSA being responsible for determining the appropriate level of capital based on the potential cost and likelihood of failure.
The Treasury has opened its proposals to a public consultation and hopes to enact them as formal legislation later this year.
See also: UK guarantees AAA RMBS in bid to jump-start lendingTurner: Capital and liquidity are core of bank regulation
Bank of England reveals £75 billion asset purchase programme
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
More on Regulation
EU banks fear green asset ratios paint an unfair picture
Industry lobbyist clashes with lawmaker over usefulness of new sustainability disclosure
EU watchdogs to launch prop trader capital review in April
Prop traders say bank-style IFR rules are driving them out, but doubt EBA will suggest changes
Investors say new SEC disclosures may sit on shelf
Advisory committee questions value of rule 605 changes, even for retail investors
CFTC hears ‘call to action’ from swaps end-users on Basel III
Commissioner Pham mulls engaging with prudential regulators over capital hit on clearing
Iosco gears up for ‘intensive work’ on AI regulation
Watchdogs risk ‘falling behind the curve’, secretary-general warns; FSB also working on guidance
Deposit insurance could transform outlook for China TLAC
Issuance needs drop dramatically if regulators allow maximum inclusion of deposit insurance fund
Canada’s FRTB pioneers get snowed on fund-linked trades
As Basel capital reforms go live, risk managers eye early adopters’ progress and push to improve capital treatment of fund-linked products
Emir 3.0 threatens lag for Simm revisions
New EU rules could stall changes aimed at improving risk sensitivity of industry margin models
Most read
- Quants are using language models to map what causes what
- Reluctantly, CME moves to clear US Treasuries
- The bank quant who wants to stop gen AI hallucinating