Alistair Darling said he would extend the FSA’s powers to ensure they have the rules to deal with different risks in individual banks, have tougher powers and penalties against misconduct and are able to expand regulation where necessary to new developments.
A Council for Financial Stability bringing together the FSA, Bank of England and Treasury will be set up to monitor financial stability and respond to long-term risks as they emerge.
He said an international mechanism for resolving large multi-national banks was needed and that he would be making proposals to the G20 finance ministers when they meet in London in the autumn.
But he ruled our breaking up large banks or separating retail banks from investment banks dismissing it as “a simplistic solution”.
CMS Cameron McKenna partner Simon Morris says: “This is a wholly inadequate response to the challenge facing the financial services industry. Darling’s announcement of a ‘Council for Financial Stability’ is old wine in a new skin-merely another way of expressing the existing Tripartite authority which has not delivered the stability that is needed.
“Little detail was given on how macro prudential regulation is to work or who will be in charge. This leaves the damaging FSA v Bank turf war in full flow. None of this, though, is surprising. The EU’s blueprint for financial regulation overshadows all of these proposals, and of course the Tories has said they will fundamentally change the landscape.”