Opinion

Felix Salmon

Abolish the FSA!

By Felix Salmon
July 20, 2009

There should be as few financial regulators as possible, and they should be as powerful as possible. So this is a good idea, I think:

Conservative leader David Cameron will abolish the Financial Services Authority and give its powers to the Bank of England if his party wins the next general election.

The beefed up central bank would monitor the health of the financial system, setting capital requirements and leverage limits, and police individual lenders. A Financial Policy Committee would be established with the same stature as the bank’s existing interest rate-setting Monetary Policy Committee.

Having strong regulators is obviously not a sufficient condition for preventing financial crises, but it is a necessary condition. Everybody thought that the FSA was a strong “super-regulator”, of course. But further consolidation can’t hurt.

Comments
4 comments so far | RSS Comments RSS

Giving the bank of england the power to regulate, in effect, itself and the other banks around it is not a good idea in my opinion.
The policing body must remain independent of interest which is why i believe the FSA should remain.

Posted by derren | Report as abusive
 

Having as few a regulators as possible, even if desirable (I’m not sure) isn’t the same thing as combining your monetary policy organisation with a regulator.

Posted by Matthew | Report as abusive
 

” Everybody thought that the FSA was a strong “super-regulator”, of course.”

Yes and no. It was considered to be strong in terms of remit (eg regulating pretty much all mortgage intermediaries whether or not they were banks), but it was also considered a light touch in terms of enforcement. The SEC was always much, much more vigorous at catching and punishing offenders.

Posted by Ginger Yellow | Report as abusive
 

If you spread it out, you have more bits for offending parties to capture. While one super-regulator can be an improvement, many small regulators can be better in other cases (the various conflicts between state AGs and the never-to-be-cursed-enough OCC and OTS come to mind)

Posted by Jason | Report as abusive
 

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