Alistair Darling is planning a new Banking Act this year that will strengthen the role of the Financial Services Authority, in an unexpected move that follows criticism that the Bank of England failed to warn adequately of the impending banking crisis.
The chancellor wants to give the FSA a new statutory objective of maintaining financial stability, making it partly responsible for a function currently entrusted to the Bank.
Darling believes the City watchdog should be responsible not just for regulating individual banks, but for ensuring that the combined impact of their business models is not dangerous to the system.
Legislation to be introduced in the autumn would make it easier for the FSA to question a bank’s practices and order it to change if they appeared to be destabilising the financial system, for example by pumping up a housing bubble by lending on overly generous terms.
Financial Times
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