Speaking last week to the Financial Times, Chancellor Alistair Darling implied that the Government might back-track on its November prediction that the economic recovery would start in the second half of this year.
Darling is quoted as saying: “This year is going to be difficult.
“There are going to be some tough calls. In the current climate, no responsible finance minister could say that the job’s done, far from it. We are far from through this.”
This comes as the regulator pushes to speed up compensation payments for depositors in failed banks and looks to ease the subscription period for rights issues.
Last week, the FSA hit banks and building societies with the news that they will have to fork out nearly £1bn over the next five years to help speed up the Financial Services Compensation Scheme.
Under the new proposals the FSA says consumers should receive compensation within seven days of a bank being declared in default.
Banks will need to spend the cash upgrading their IT systems and proactively informing customers of the changes.
FSA chief executive Hector Sants says: “We recognise that to help underpin confidence in our banking system consumers must feel confident that their money is well protected – regardless of whether they ever have to claim compensation.”
In another move, announced today, the regulator proposed a reduction in the minimum subscription period for companies undertaking a rights issue.
The FSA says reducing the minimum from 21 calendar days to 14 calendar days, or 10 business days, will help make capital raising more efficient.
FSA managing director of wholesale and institutional markets Sally Dewar says: “Reducing the subscription period will enable companies to raise capital much more quickly from the markets, when they need it most. Taking these steps will help limit the potential for rights issues to be disrupted by market instability, which could potentially damage investors’ confidence.”
To the optimist, these measures could be seen as a move to improve outdated procedures that have been proven ineffective over the last six months.
To the more skeptical observer, it could be a sign the FSA is expecting more banks and financial institutions to get into serious trouble over the coming months.
But no matter what the forecast for the future, the blame for recent events seems to be settling with the regulator.
In an interview with the Financial Times last week, former Prime Minister Tony Blair said had regulators come forward to political leaders with specific concerns about the financial system and warned of the results, governments would have taken action.
He said: “The truth is people did not see this coming.”