It is gripping stuff, but the central public policy question remains the same: does Britain have the best possible arrangements for supervising its banks?
It has to be recognised that no system will be flawless. A clever fraudster will always be able to find a loophole and, given the speed of modern financial transactions, big sums can vanish before the hole is sealed.
The challenge is to mitigate the damage and prevent crime or incompetence in one area of the financial markets infecting everything else. If London is to continue to thrive as a centre of international finance, it needs a regulatory regime which is clever, fast-moving and effective, one which is neither too light nor too heavy. It must, in short, inspire confidence.
The Bank and the Chancellor argue that things are just fine as they are. They are wrong. The time has come to tell the Bank that it should concentrate on the vital task of safeguarding the value of our money, rather than running around worrying about phantom derivatives accounts in overseas branches of London investment banks.
The most persuasive argument for change is that the Bank's credibility is unavoidably damaged when it fails to spot a Barings or a BCCI. You would not catch the Bundesbank with this kind of mud on its hands. Also, these days, it does not make sense to have separate regulators for what are, in effect, different kinds of banks - namely building societies and securities dealers.
Ken and Eddie argue that this would be no more than shifting the furniture: the same people would do the supervisory job, just under a different name. Even if this were true, and there is no reason why it should be, clarifying the purpose and structure of an organisation - especially a public organisation - is always a good thing. It increases transparency, and helps everyone else to work out exactly who is responsible.
A better argument is that the Bank's monetary managers would continue to need to know almost as much as the supervisors about what is going on in the banking world, because they need to track how much money banks are lending. Also, a big bank in trouble represents trouble for the whole economy, not just the institution and its customers. In a real crisis, it would still be the Bank's lifeboat sailing to the rescue.
None of these, however, are large difficulties. They have been dealt with satisfactorily in numerous other countries. It is time for the Government to recognise that the merits of creating separate, credible and well-focused institutions outweigh the costs of change.Reuse content