MPs want rethink on Bank's role
All-party report raises the prospect of a new body taking over supervision
Tuesday 07 November 1995
and DAVID HELLIER
A cross-party committee of MPs is expected to call today for a full- scale review by the Treasury of the Bank of England's supervisory role in the banking industry .
This is the first time that the powerful Treasury and Civil Service Committee has officially raised the possibility of stripping the Bank of its supervisory role.
"It is not an inconceivable development that there could ultimatedly be a free-standing prudential supervisor of banks and building societies under the aegis of the Treasury," said a source on the Committee, which has been examining the future of financial services regulation.
The MPs' committee, chaired by Sir Thomas Arnold, has stopped short of recommending an immediate hiving off of the Bank's supervisory powers - but the fact that the majority of Conservative as well as Labour MPs voiced their concern so strongly about the Bank's effectiveness will increase pressure on Eddie George, the Governor. The Bank has fought an intense lobbying battle in recent years to defend its role as lead supervisor of the banking sector, alongside its other key responsibility for monetary policy.
The MPs say the Bank's effectiveness as a supervisor has been called into question by the recent collapses of BCCI and Barings. Committee sources said although the language of the report was relatively restrained and it stopped short of calling for the removal of supervisory powers now, there had been a passionate debate which split the 11-strong group of MPs.
Some of the Labour members wanted to call for a radical overhaul of financial regulation in the City, favouring the concentration of regulatory powers - currently split among various bodies on industry lines - into one powerful overall body more akin to the Securities and Exchange Commission in the US. This body could be based on the Securities and Investment Board, headed by Andrew Large.
The MPs expect they will make further comments on the issue when they have finished their enquiries into the collapse of Barings. The Board of Banking Supervision's report on Barings was highly critical of weaknesses in supervision by the Bank of England.
In particular, it questioned whether the Bank possessed the required level of expertise and practitioner-awareness to supervise adequately such sophisticated and rapidly growing areas as the global securities markets.
The Treasury, which has been asked by the parliamentary committee to review the Bank of England's role, is believed to be increasingly in favour of a thorough reshaping of supervision and regulation, which would concentrate expertise and resources in a powerful umbrella organisation.
Angela Knight, Economic Secretary to the Treasury, recently said the Government was unwilling to embark on such difficult and contentious legislation this side of an election. But there is a growing view that, whichever party forms the next government, there will a push to consolidate supervision.
"We need to look at the financial services sector as the firms look at themselves - as integrated businesses," a committee source said. "With the market rapidly going this way, it makes little sense for regulators to work along fragmented lines that are increasingly outmoded."
Other City institutions come in for criticism from the committee, including the Serious Fraud Office. Its director, George Staple, was criticised for an alleged bungling of the trial of Roger Levitt, the financier, whose light sentence shocked the nation.
- 1 Thailand deaths: Pair's bloodied bodies found naked on Koh Tao beach
- 2 Scottish independence: Ireland since 1919 is a lesson for Scotland in what a Yes vote means
- 3 Daniele Watts: Django Unchained actress detained by Los Angeles police after being mistaken for a prostitute
- 4 John Travolta addresses former pilot's gay romance allegations publicly for the first time
- 5 Kanye West stops concert after two fans don't stand up - doesn't realise one is in wheelchair and the other disabled
Daniele Watts: Django Unchained actress detained by Los Angeles police after being mistaken for a prostitute
The political class is doing what Hitler couldn’t – destroying Britain
Scottish independence: Nationalist leader Jim Sillars threatens pro-union companies with 'day of reckoning' after independence
Scottish independence: Yes campaign feels the heat as Alex Salmond's NHS claims come under furious attack
Portuguese academic says British are 'filthy, violent and drunk'
£23m Birmingham cycle scheme is attacked by Tory councillor for not catering to the elderly
iJobs Money & Business
£20 - 24k (Uncapped Commission - £35k Year 1 OTE): Guru Careers: We are seekin...
£20 - 24k + Benefits: Guru Careers: This is a great opportunity for an enthusi...
£280 - £320 per day: Ashdown Group: The Ashdown Group have been engaged by a l...
£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...