Former business secretary Lord Peter Mandelson has hit out at the repeated threat of additional financial regulation, saying it could destabilise the financial system.
Speaking at the National Association of Pension Funds conference in Liverpool today, Mandelson said the financial system must be made productive.
He said: “Perpetual debate about acceptable safeguards, about what further inquiries are needed into the past, and repeated threats of regulatory change in the future run the risk of simply de-stabilising the financial sector without bringing about additional beneficial change within it.
“We will not secure economic growth without banks and capital markets capable of funding it. So let’s digest and fully implement the current reforms and then make stability the priority to ensure finance gets back on its feet.”
But the former Labour MP said the FSA should have been “more intrusive” in its regulatory approach before the financial crisis.
He said: “The interrelationships between the FSA, the Treasury and the Bank of England were untested, and when they did come to be tested it was by the most almighty, unprecedented shock imaginable.
“The knowledge of the regulatory system was not adequate for the task they had to take on and I do not think their supervision was intrusive enough.
“I do not think the intensity of the regulatory system was keeping pace with the growing complexity of the financial products it was regulating.”
Mandelson also backed Sir John Vickers’ recommendations to ring-fence retail banking from investment arms and tougher rules over banking ethics and culture.
He said: “[We need to return to a time] when conflicts of interest did not abound, when practices were not driven by extreme financial engineering and profit-making and when companies and individuals could rely on financial advice that was truly independent and objective.”