and NIC CICUTTI
A full-scale parliamentary debate into the collapse of Barings has been requested from both sides of the House of Commons amidst concern among MPs over the Bank of England's supervisory competence.
Sir Thomas Arnold, the Conservative chairman of the influential Treasury and Civil Service Committee, said yesterday he had written to Tony Newton, leader of the House, asking for a debate which would thoroughly examine the Bank of England's role. A similar request has been made by Alastair Darling, Labour's City spokesman.
Sir Thomas said there was "considerable concern" inside the Treasury Committee over the Bank's role as lead supervisor for the banking sector. In its report on financial services regulation in Britain, published yesterday, the committee recommends that the Treasury "should now review the role of the Bank of England as prudential supervisor of the banking institutions."
The committee also criticised financial watchdogs for their failure to prevent the pensions mis-selling scandal and their inability to ensure speedy redress for victims of bad advice. The report described as "unacceptable" the lengthy delays in investigating unprofessional conduct by insurance companies and financial advisers.
"The fact that the task of identifying those individuals who received poor advice and calculating the level of compensation is difficult and onerous does not absolve the regulators, and ultimately the firms, from providing swift and full recompense for their actions," the committee said yesterday.
The report officially raised for the first time the prospect of the Bank of England being stripped of a role it has fought vigorously in recent years to defend. "A free-standing prudential supervisor of banks and building societies - answerable to and appointed by the Treasury - is not an inconceivable development, which has been given greater credibility by the events of the last few years," the report said.
The Bank responded yesterday by saying the committee had not conducted a serious investigation into banking supervision. "We do not recognise the picture the committee painted of the Bank being behind the game or out of touch with the international supervisory community. We have every idea of how to deal with the securities and derivatives markets and are continuing to improve our knowledge," the Bank said.
The Treasury committee also said it hoped to hold detailed hearings into the Barings collapse in the new year and would call former Barings executives as witnesses .
The MPs also warned front-line regulators such as the Securities and Futures Authority and the Personal Investment Authority that unless they ended "in-fighting and jostling for position" the law might have to be changed to abolish them and replace them with a single regulator based around the Securities and Investments Board.
The report called for a reform of the Financial Services Act to allow lending to be regulated by financial watchdogs. The committee said the complexity of many products, such as home income plans sold to thousands of elderly investors, made it impossible to separate lending from investment. The committee also proposed that professional bodies such as the Law Society should give up their right to regulate members' financial activities and existing watchdogs should take over.
Despite the relatively restrained wording of the report, reflecting the need for compromise, a majority of the 11-strong committee expressed grave misgivings about the Bank of England's future as banking supervisor. "In the course of the parliamentary debate, I would not be happy if the Chancellor merely repeated the view that setting up a separate banking supervisor would just be changing the brass name-plate. He will have to argue his case more fully than that," Sir Thomas said.
The Treasury, which has been asked to carry out the review of the Bank, is known to be sceptical about the effectiveness of the present arrangements.Reuse content