MPs' City inquiry 'falls short'

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The Independent Online
NIC CICUTTI

and DAVID HELLIER

A year-long inquiry by MPs into the City's leading financial watchdogs, including the Stock Exchange and the Securities and Investments Board, looks set to cause uproar among those who want the City reformed.

Details beginning to emerge ahead of the report's publication next week, indicate that the majority of MPs on the Commons Treasury and Civil Service Select Committee want the City left largely unchanged.

Members of the committee are believed to have rejected proposals to bring all self-regulatory bodies under a single government-controlled body. There is already a row between Tory and Labour members - a Labour proposal for an immediate overhaul was voted down earlier this week.

One member said the report, finally agreed on Monday, would be "disappointing". Some members are believed to be preparing an addendum to the main report that more closely reflects their views. The select committee inquiry into the regulatory system follows a succession of financial scandals that have rocked the City.

Last year, the SIB found that up to 1.5 million investors may have been wrongly advised to switch out of company pensions and into private ones. Compensating them could cost billions of pounds.

In February, Barings, one of Britain's oldest merchant banks, collapsed with debts of pounds 800m following the activities in Singapore of Nick Leeson, a former futures trader.

One source said yesterday: "Clearly there are problens with the present system which have to be looked at, including the problem of competition between different regulators, but we do not recommend that they should be folded into one at this stage. If the present system does not work there will have to be a rethink."

Another MP added: "I think there has been agreement among all the members that a lot of the regulatory system has been moving away from self-regulation to a more formalised structure anyway. What we are in favour of is a move towards a more united system, which has some statutory backing, under a common umbrella. But what we are also keenly aware of is that we do not want to damage the City's ability to generate more business. Nor do we want to damage its reputation."

The MPs have already decided to reopen their inquiries into the collapse of Barings and the role of the Bank of England in this debacle. They hope to begin their inquiry next year.

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