The chancellor outline new financial regulations
A shake up of the way the financial services industry is run looks likely to emerge within the next few days as the chancellor, Alistair Darling, puts the final touches to his recommendations.
The report is likely to lean heavily towards the recommendations of Lord Turner, the chairman of the Financial Services Authority, rather than those preferred by Mervyn King the governor of the Bank of England. The blueprint will take the form of a green paper will seek to strengthen existing measures that require all institutions to have “orderly wind-down” procedures in place; this would ideally prevent a failing bank from damaging the entire banking system. One proposal will be to insure that all banks hold more capital during the boom years to cushion the lean years.
The stronger tripartite system, involving the Bank of England, FSA and the Treasury, will give more powers and resources to the FSA. It will also monitor bank remuneration and devote more time to complex institutions.
All three parties agree that commercial banks with investment-banking arms should hold more capital than “utility” banks. Many in the city are unhappy with the tone of Mervyn King’s speech and are worried about EU wide financial regulation. There is support for a reinstatement of the American “Glass-Steagall Act” which put a halt to retail banks acting as investment banks.
| 
