LONDON - In his widely anticipated review of banking regulation, to be published on March 18, Lord Adair Turner of Ecchinswell, chairman of the Financial Services Authority, is expected to propose a new macro-prudential role that will provide oversight of the entire British banking system. Under the proposal, regulators will be able to impose stricter rules on bank lending and balance sheets if financial stability is found to be at risk.
The move is an attempt to fix the much-criticised tri-partite system of regulation in the UK between the FSA, the Bank of England and the Treasury. Any new rules would be set by the Treasury in its role as de facto head of the tri-partite system, but its decisions would be informed by the Bank of England, which will remain responsible for financial stability. The FSA would implement the rules on a bank-by-bank basis.