MPs have criticised the Government over its proposed reforms to the tripartite system, saying they are “largely cosmetic”.
In its final report on the banking crisis, the Treasury select committee says there is still “a muddle” over who among the Bank of England, the FSA, the Treasury, the Council for Financial Stability and the bank’s financial stability committee is responsible for systemic oversight.
It considers that no new macro-prudential responsibilities should be allocated until key decisions over the precise tools needed are made. The report does not support the Conservatives’ proposals to scrap the FSA.
It urges the regulator not to rule out a Glass-Steagall approach to banking regulation and also suggests a tax on size to deter banks from growing too big.
It urges caution on product regulation, which it describes as “a blunt instrument”, although it argues that where a particular product’s bene- fits are outweighed by inappropriate uses, the FSA sho- uld look very closely at restricting their use.
Select committee chairman chairman John McFall says although the FSA had failed spectacularly in its super- vision of the banking sector, it has started to rectify its mistakes under chairman Lord Turner’s direction.
McFall says: “The FSA must develop sufficient teeth in order to be able to go against the tide in the future and take unpopular decisions.”