Tuesday, July 21, 2009

FT: Tory plans for FSA/Bank of England "unwise"

The leader in today's FT says that the Tory plans to close down the Financial Services Authority and give its powers to the Bank of England represent unnecessary and counter-productive butchery:

Under the Tory plans...an unchecked and unchallenged Bank may fall into groupthink about financial stability – as it did during the decade before the crisis. The Conservatives propose recruiting a handful of outsiders to sit on a financial policy committee to inject intellectual competition into the monetary authority. But it is unrealistic to expect these few people to spot and counter biases across the Bank’s domain.
All in all – and taking into account the disruption they will cause – these plans are unwise. They are also a distraction from the Tories’ better ideas, such as improving banking
competition policy. And they will make the FSA’s task more difficult over the coming year. A little keyhole surgery on the government’s proposals would yield better results than these plans for wholesale butchery.

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