Speaking at the Mansion House dinner last night, Darling said the BoE would be given a formal legal responsibility for financial stability, on top of its existing role in setting interest rates.
He said: “The Government now intends to provide as well a formal legal responsibility for financial stability, alongside (the BoE’s) existing role in monetary policy. A slimmed down court will have oversight and a new Financial Stability Committee, including non-executive members drawn from court, will guide the bank’s operations in this field.”
The Chancellor has also proposed changes to the BoE’s governance structures and providing it with a range of tools to enable it to carry out its new responsibility, including a leading role in the implementation of the new special resolution regime. Darling’s proposals will be included in the Banking Reform bill, to be introduced later this year.
At the dinner, Darling confirmed the FSA would be granted new powers to tackle market abuse.
He said: “It is important the FSA has the necessary powers to tackle market abuse and ensure investor confidence. The Government will be bringing forward legislation to provide the FSA with additional powers and we are already working with prosecutors to help the FSA improve its prosecution rate.”
Darling said the Government had faith in the tripartite system but it needed strengthening.
He said: “The challenge for us is to ensure the authorities can act quickly and decisively where necessary to support financial institutions. These proposals will give the authorities the full range of powers they need. They do so by entrenching the model established a decade ago – the FSA responsible for individual institutions, the BoE for the stability of the financial system as a whole – but by providing each with new powers and improving the coordination between them.”
Also speaking at Mansion House, Bank of England Governor Mervyn King welcomed the new powers.
He said: “We now have the chance to put in place a set of reforms that
provide a coherent framework for banking regulation. It is an opportunity we
must not throw away.”