Banking Oversight to be Handed to BoE in FSA Break Up
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Spread Trading Report from Simon Denham of Financial Spreads.
As the Captain decides to rearrange the deck chairs on the Titanic, the BoE has been tasked with taking over much of the FSA’s remit.
Overall we are left wondering “what is the point”? One assumes that, as nearly all the regulatory expertise now lies with the FSA, the same people will just transfer their loyalties from one institution to another and nothing will change.
From the vantage point of history it appears that, as far as the UK was concerned, the Banking crisis of 2008/09 was pretty much solely confined to two institutions, RBS and HBOS.
Northern Rock and B&B would have survived in any other European nation as all their problems were, in the main, liquidity issues, rather than excessive bad debt, which the BoE should have provided for. That is, after all, one of their major remits, being the lender of last resort.
RBS was undone by its purchase of ABN, up till this moment it was reasonably ok, which not only cost a vast sum of real cash but also exposed RBS to a unit which actually had enormous negative value. This was a major failure of senior management but hardly an FSA issue.
This leaves just HBOS as the single major torchbearer of overall bad lending practices and even this was not a derivative based problem but an event of actual real money going out the door into the pockets of borrowers.
While the FSA may be in the firing line for HBOS it is difficult to believe that another regulator would have done things any differently.
We now have the situation that the rules are being so stringently exercised that institutions looking for regulatory approval are giving up in the face of huge barriers to entry being erected.
While it appears a truism that such permissions should only be given after exhaustive investigation we are seeing this reach too onerous a level. This has the effect of entrenching existing businesses to the detriment of customers.
One of the reasons for the recent huge profits being made by the investment banks is that there is now far less competition. Even banks which used to have smaller investment units have been pulling out of the sector in the face of public and political pressure.
The above comments do not constitute investment advice and neither Financial Spreads nor Clean Financial accept any responsibility for any use that may be made of them.
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'Banking Oversight to be Handed to BoE in FSA Break Up' edited by DB, updated 17-Jun-10
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