New challenge to Osborne’s FSA plans

The US is considering moving regulatory powers from the central bank to an independent financial regulator. This is at odds with George Osborne's approach.

A day after Financial Services Authority chief executive, Hector Sants, called the Conservative party’s plans to split up the financial regulator a return to the “dark ages“, reports outline that the United States are considering an approach which would move powers from the central bank to an independent financial regulator. This is the opposite direction of travel to George Osborne’s plans.

The Associate Press reports that:

“Senate Banking Committee Chairman Christopher Dodd on Tuesday called for sweeping new government powers to prevent another economic collapse, protect consumers and dismantle failing institutions.

“Dodd’s 1,100 page-draft would strip the Federal Reserve and other regulators of their powers to regulate banks and hand that job to a single agency.

The Conservative party announced in July that they plan to scrap the FSA and move banking regulation to the Bank of England.

Hector Sants said:

“I strongly believe that dividing responsibility for enforcement activity would invite a fragmentation of approaches and a ‘turf war’ between the different bodies involved

“Truly effective institutions are built on strong cultures and….strong cultures need time and experience to evolve.”

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7 Responses to “New challenge to Osborne’s FSA plans”

  1. Left Foot Forward

    US considering moving banking reg from the Fed to a new single regulator. Opposite to Osborne's plans

  2. Anon E Mouse

    Judging by the utter incompetent fiscal mess this useless government has left us in I’m not taking any lectures from anyone involved in the current (flawed) system.

    I don’t care what these people say – the old system is useless and would this be the same Hector Sants who waffled on and on and on at that Treasury Select Committee?

    The same Hector Sants who is the CEO at the incompetent FSA?

    The same Hector Sants who’s going to lose his job when the Tories get in?

    Hardly an impartial view guys…

    …if this is the best you progressives have we are DOOMED 🙁

  3. willstraw

    Hi Anon,

    I think the point here is that both the US and UK were found wanting in letting housing and credit bubbles build up and not doing enough on banking supervision. But the US is now considering moving to a singular regulator while the Tories are considering breaking up the FSA.

    I would have thought that it is more important to get the regulations right than to rearrange deckchairs on the proverbial titanic. Sants may be culpable but he also makes a good point about turf wars, don’t you think?


  4. Anon E Mouse

    Hi Will,

    The problem is the regulations didn’t work and after 12 years of a Labour government it isn’t good enough.

    The Labour line of the Tories didn’t support us with blah blah and think how much worse it would be if we’d listened to them is speculative. Their failures are factual – we can see them.

    The US is moving Left politically but Europe moves to the Right so don’t expect the same systems to work on both sides of the Atlantic.

    The problem I have as a Labour voter is with the government since TB got shafted by them.

    There seems to be an inner cabal with Brown and his cronies (I don’t include your old man in this) and for reasons unknown to me no one challenges them.

    Labour should have had a leadership election but Brown has no balls. Same with the General Election that wasn’t. This government must think we (the people) are stupid when he said he didn’t hold it because he thought he’d win.

    Time is rapidly running out here Will – you’re obviously well connected – can’t you give Charles Clarke a bell and see if he’s up for the job as leader? Or Alun Johnson!

    As for the FSA – it’s useless, get rid.

  5. Krystian

    I think the institutional structure for financial regulation in the UK is fine, and the Tory proposals are just an attempt to look like they are doing something on this issue when really they are just fiddling. They are essentially targeting the tripartite arrangement, which is not to blame for the crisis. One of the major problems was that that the focus of supervision was micro-prudential, looking at individual banks, hence insufficient attention was paid to broader system wide risks. Therefore there needs to be a shift too more macro-prudential regulation, but you can do that within the current regulatory framework, no need to waste time and effort fiddling around like the Tories propose. Just reflects the bizarre approach they are taking with regards to independent regulatory agencies across all sectors, they seem to have little idea of what they’re doing.

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