Speaking at the Building Societies Association annual conference in Manchester, Centre for the Study of Financial Innovation director Dr Andrew Hilton told delegates that co-operation between the FSA and the Bank of England needs to be greatly improved in the wake of the credit crunch.
He said that one serious possibility was to require that the chairman of the FSA should always be a former deputy governor of the BoE or an executive director of the Bank.
He added: “At least, no-one at the Bank or the FSA should ever rise to a senior management position without having spent some time at the other organisation.”
Hilton also suggested having BoE representatives on arrow visits would make a lot of sense aswell as putting FSA representatives into the BoE’s regional offices. “After all the Bank did have a regional office in Newcastle; it would probably have been useful for the FSA to have one up there aswell.”
“These last two points emphasise the need for better cooperation between the FSA and the Bank of England. Unless you are going to accept that issues of systemic stability should be taken away from the Bank altogether and given to the FSA, which seems to have been ruled out, cooperation between the two must be more improved.”
Hilton added: “It used to be okay in the days when almost everyone in a senior position at the FSA was a Bank of England alumnus but that isn’t the case anymore. The distance between the two organisation’s has grown exponentially.”
He dismissed the Treasury Select Committee’s proposal for a third deputy governor who would have the special split responsibility for systemic issues and for relations with the FSA. Hilton said this was “bizarre” and that there was already a deputy governor for systemic stability at the Bank.