This Report is the last to be published under the Committee's Banking Crisis inquiry.
By any measure the FSA has failed dreadfully in its supervision of the banking sector, but it has already begun to rectify its mistakes. The first chapter considers the steps already taken by the FSA to improve its regulation of banks in response to the failings exhibited in its handling of Northern Rock. We welcome the Supervisory Enhancement Programme (SEP) and the increased intensity of supervision which it will bring to bear on the financial services sector. The SEP is a necessary but not sufficient reform.
We note that the regulatory philosophy of the FSA has changed. It has less faith in market forces than before; it is more willing to challenge firms' business decisions; it now considers the competence of new bank directors and appears more willing to remove 'the punchbowl from the party'. All of this is good, but all of this is also fashionable. The FSA must develop the confidence to take unpopular decisions when the economic boom begins again, in the face of both industry and the political class.
Access full Report.
Posts
