The House of Lords economic affairs committee has called for macro-prudential supervision to be given to the Bank of England’s financial stability committee rather than left with the FSA.
In its Regulation and Banking Supervision report, published this week, the Lords committee says the BoE financial stability committee should have “direct access to the information req-uired and a suitable policy inst-rument to counter pro-cyclicality in the banking sector”.
The report raises concerns about Government plans not to give the stability committee executive powers, claiming this will leave it ineffective. It recommends the FSC should be chaired by the governor of the BoE and include senior FSA and Treasury representatives.
The Lords call for clearer delegation of decision-making powers between the tripartite authorities and a focus by regulators on banks’ risk models.
House of Lords economic affairs committee chairman Lord Vallance says: “In the UK, the tripartite authorities of the BoE, the FSA and the Treasury failed to maintain financial stability, in part because it was not clear who was in charge in a crisis and because not enough attention was paid to macro-prudential supervision.”