Lords recommend additional powers for the Bank of England

by Gill Montia

Story link: Lords recommend additional powers for the Bank of England

The House of Lords Economic Affairs Committee has offered a response to the financial crisis that includes a swipe at the UK’s tripartite system of regulation.

The Treasury, Bank of England and Financial Services Authority (FSA) were jointly responsible for averting a crisis in the financial sector but according to the Committee’s report, when disaster struck, it was not clear who was in charge.

The Lords are therefore demanding reform and suggest that the Bank of England needs additional powers as “without a clear executive role, the Bank can do no more than talk about financial stability. This exposes it to reputational risk without generating any clear benefit”.

In addition, the FSA is taken to task for focusing keenly on its consumer protection role to the detriment of financial stability.

The Lords also highlight the need for UK authorities to have increased powers over foreign banks operating in Britain.

The report does concede that “inadequate regulation around the world also played a part as the crisis unfolded” and recommends there should “be no rush to action” as change to the regulatory regime needs to “make future crises on this scale less likely without stifling innovation”.