Jeremy Warner: Bank needs true outsiders on financial stability

Outlook Nobody is going to disagree too much with the four directors appointed yesterday from the Court of the Bank of England to the newly created Financial Stability Committee. Roger Carr, Sir David Lees, Mark Tucker, and Harrison Young all no doubt make worthy guardians of banking stability.

But how much better it would have been had some true iconoclasts and outsiders been appointed to answer the Bank of England's failings in this department. Setting interest rates became the be all and end all of the Bank of England's purpose during the great moderation. Working in financial stability is said to have been like being banished to Siberia. In any case, the financial stability function might just as well have been there for all the notice anyone took of it.

As is now all too obvious, this was a big mistake. Even so, Mervyn King, the Governor, won the battle to make the FSC, the purpose of which is to beef up this function, an internal affair as a sub-committee of the Court. As I say, I'm not going to quarrel with any of the appointments made yesterday, but my fantasy FSC would include some of those who actually saw the banking crisis coming, such as Terry Smith of Tullett Prebon, the economist Nouriel Roubini, and Jon Moulton of Alchemy Partners. There is no point in having people who are part of the consensus to advice on financial stability. What's needed is those who are outside the club.