Plans to shake up the financial regulatory system by making the Bank of England a “super-regulator” do not leave it with too much power, Sir Mervyn King has said.
The Bank of England will be given the additional responsibility of overseeing the health and financial stability of companies under the new system, as the Financial Services Authority (FSA) is set to be scrapped. However, during questioning by the financial services bill joint committee, Governor King admitted it was “already a big job” but denied he was being given too much power.
King suggested that the Prudential Regulation Authority (PRA), which will supervise the soundness and safety of individual financial firms, could be made an independent body if politicians still believed he had too many jobs on his plate. The PRA is to be part of the Bank of England under the current plans.
He said it was important that the governor was ultimately in charge as he was accountable to Parliament, although many of his responsibilities are delegated to colleagues.
King said: “If there was a major problem within the Bank, I’m convinced that you would want to call the governor to appear before you and ask what went wrong, and you couldn’t do that unless the governor was chairing the bodies. I think it’s do-able provided that it is understood that the governor would delegate many responsibilities.”
The responsibility for maintaining the UK’s general financial stability will fall to another new body, the Financial Policy Committee (FPC), which will sit within the Bank of England. The FSA and the Treasury are currently responsible for this task.
Meanwhile, the FSA’s consumer protection duties will be taken on by the Consumer Protection and Markets Authority (CPMA).
Nearly three quarters (75 per cent) of people do not believe the FSA was effective enough in holding the banks to account in the lead up to the financial crisis, a Which? survey found. Approximately eight out of 10 (82 per cent) of people reckon it should be given more power to force change in the banks, while 76 per cent said the banks could not be trusted to regulate themselves.
The FSA earlier this week called for stronger measures to make sure bank chiefs who have mismanaged their companies are banned from the industry.