Monday June 29, 09:00 AM
UPDATE 1-UK to keep bank regulation away from BoE-Mandelson
By David Milliken
LONDON, June 29 (Reuters) - Britain plans to keep financial regulation in the hands of a beefed-up Financial Services Authority rather than transfer powers to the Bank of England, Business Minister Peter Mandelson said on Monday.
The BoE may gain a greater financial stability role but the FSA will retain sole power over direct regulation, Mandelson said in the text of a speech provided by his office, which comes after a week of tension between the BoE and the government.
'We need to keep prudential and conduct of business expertise in one place, in a regulator capable of seeing all parts of the picture at once. That regulator has to be the FSA,' Mandelson said in the speech to be delivered to the British Bankers Association.
BoE Governor Mervyn King told legislators on Wednesday that he could not be held accountable for future financial market crashes if he was not given more powers, and said the government had not consulted him on its planned regulatory changes.
On Saturday, Conservative shadow finance minister George Osborne was forced to deny that King had leaked details of an earlier bank recapitalisation plan after media reports that top ministers in the ruling Labour Party believed there was an 'unholy alliance' between King and the opposition.
Labour is expected to publish fresh legislative proposals for bank regulation next week, and Mandelson will warn bankers that reform would have to continue even if the economy improved.
'I have never felt such a sense of distrust and anger between the financial sector and the rest of the economy,' he said in the speech.
Mandelson said next week's proposals would centre around the following themes:
- more macroprudential supervision to target systemic risk
- new capital rules that match the economic cycle and account better for different types of risk
- a reshaped landscape for derivatives
- a 'fundamentally different approach to risk and failure' for banks with implicit government guarantees
'While I think there is an argument for the Bank taking a more direct role in financial stability issues, I don't support a twin peaks system. I believe the lesson of the last year is that we need a stronger regulator, not a weaker one,' he said.
FINAL SAY
The European Union is also considering new financial market rules, and Mandelson reiterated Britain's view that the final say on regulatory decisions had to remain a national power even if rules were set internationally.
'Brussels has to recognise that EU rules will affect the UK far more than any other European state. We have more skin in this game than the rest of Europe put together,' he said.
Mandelson, who was formerly the EU's chief trade negotiator and a key figure in Labour's 1990s revival, will urge British banks to get support for their wishes from counterparts elsewhere in Europe.
'All of us need to be pushing back against a knee-jerk political response from the (European) Parliament or the (European) Commission,' he said.
Mandelson also said that banks needed to do more to lend and help a 'fragile' economic situation.
'There are some signs that the financial system is stabilising,' he said. 'So there are clear expectations that credit must be available -- and not just available, but reasonably priced.
'In the real economy things remain extremely difficult, but ... there is evidence that after working down inventories, managers are gradually building up stocks again.
In an interview with the Financial Times, Mandelson said the worst was over for the British economy, which has plunged into recession in tandem with peers around the world.
'The worst is behind us,' he said. 'The fall in demand, market activity and reduction in bank lending is now bottoming out. These are encouraging signs.'
He said government forecasts for a return to economic growth later this year, which many economists had thought optimistic, were 'on target'.
(Editing by Jon Loades-Carter) Keywords: BRITAIN BANK/MANDELSON
|
|
|
Send Article by Email
Send Article by IM
Blog This with Y! 360
Printable View
