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Tories to give BoE more power

The Conservatives have called for the Bank of England to be granted stronger powers to monitor banks’ lending and for an independent body to scrutinise Government spending and debt.

Speaking at the Conservative conference in Birmingham yesterday, party leader David Cameron said that Prime Minister Gordon Brown has “had his boom and his reputation is now bust”.

He called for the Bank of England to be given the power to take over and administer failing banks, greater responsibility for monitoring lending.

Under the proposals which will be outlined in more detail by Shadow Chancellor George Osborne at the conference today, the Bank of England would have a stronger role in market oversight within the tripartite system.

Through what the Conservatives are calling a “debt responsibility mechanism” the Bank would be required to write open letters to the FSA throughout the year to assess market risks.

The FSA would be required to take this into account when setting individual capital requirements for banks, which the party says would be tougher in boom times to prevent debt-fuelled bubbles from forming.

The Conservatives would also increase depositor protection to £50,000 and require that this be paid out within a week of a bank failing.

The party also says it would require financial institutions to contribute more funding to the FSA and require them to provide skilled secondees to work with the regulator.

The Conservatives have pledged to scrap the “discredited” fiscal rules and bring down debt as a percentage of GDP over the economic cycle.

The party would introduce an Office for Budget Responsibility to assess independently the sustainability of the public finances and hold the Government to account.

Cameron said: “I don’t want to see a situation where we see a stream of banks and building societies nationalised with the tax payer taking all the risk of all the bad decisions that might have been taken beforehand.

“That is why we want the Bank of England to be able to take over and reconstruct and administer banks and building societies that get in to trouble.”

He added: “Under our plans the Bank of England will once again will be able to call time on the level of indebtedness and instruct banks to change their behaviour.”

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