Chillin' out till it needs to be funded
The new bank consumer law and the FSC as envisaged in the law passed today does put power back in the hands of government with the Chancellor holding veto powers when the crisis passes a certain threshold and the taxpayers’ finances/savings are at risk. As George Osborne mentioned today at Davos, the system however gives the Government total powers to dictate bailouts and monetisation to resolve a crisis.
Though the discretion and the new centre of regulatory authority in the Bank of England does pose a new level of complexity as any such thresholds will be discovered by politicians and allow favors and disfavors to individual bank managements, it does give London competitiveness as an International Financial Center as it mixes tough retail ringfencing with an evolved Prudential Regulation Authority for monitoring risk and liquidity norms among others in terms of the new to be laid structure with the Financial Policy Committee completing the triad supporting the Bank of England and purportedly the Chancellor.
A shortlist of discretions would help to clear the air as checklists have”smouldered a fog ” in the minds of policy makers about managing the lawmaking as admitted by Mervyn king when the Vickers laws were passed. London has become an International Finance Center ont he strength of keeping global standards and being light on the law but recent powerplays by the governments have not encouraged banks to grow their London franchises further.
At the retail end the Financial Conduct Authority will take over from the Financial Services Consumer Panel and the Office of Fair trading with complete jurisdiction over Consumer complaints and fraud investigations.
There will be more confusion later as Mervyn King goes into details of regulation to be created to back the superstructure where the discretionary powers of the Policy Committee , the BoE governor and ultimately the Chancellor do come in play and an astute policymaker can yet cause the ecosystem irreparable damage giving banks leeway to lobby with policymakers after the fact. For example the FCA was to have the superpowers to regulate competition in the sector as well but it had to hold back on such definitive changes.
Announcing the new Financial Services Bill in a speech at the World Economic Forum (WEF) in Davos, George Osborne said: “The Financial Services Bill will overhaul the failed system of financial regulation which allowed such dangerous levels of leverage to emerge.
The FSA will be scrapped in 2013
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