Former Chancellor Alistair Darling has attacked the Bank of England’s understanding of the banking crisis and is calling for an overhaul of its governance structure.
The bank is to be given responsibility for regulating banks, as well as powers to take action against risks to the stability of the financial system.
The new Prudential Regulation Authority and the Financial Policy Committee will both sit within the bank.
Speaking on The Andrew Marr Show last week, Darling said the governor will hold too much power under the new regulatory structure. He said: “This is an awful lot to invest in one person. The bank’s governance needs to change. It needs to be constructed so the governor has to be first among equals.”
Darling said the bank did not have “anywhere near an adequate understanding” of what was going on in the banking system during the crisis. He said disagreements he had with bank governor Mervyn King during the crisis undermined efforts to deal with the situation.
Darling wanted to inject money into the system to stop it freezing but King was focused on the solvency of banks. Darling said: “The two are related but, through the autumn of 2007, we did not deal with the crisis as effectively as we could because of this disagreement.”
In his book Back from the Brink, published this week, Darling claims he sought legal advice on forcing the bank to act. He was told it could be possible, but backed off for fear of a “disastrous” public row with King.