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Banking changes ‘largely cosmetic,’ say MPs

Banking changes ‘largely cosmetic,’ say MPs

Category: Economy

Updated: 31/07/2009
First Published: 31/07/2009

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

A group of MPs has released its final report following its evidence sessions on the banking crisis, labelling changes made to the system as 'largely cosmetic.'

The Treasury Committee also said the reforms made to the tripartite system announced in the Government's recent White Paper will make little difference in themselves.

Earlier this month, Chancellor Alastair Darling outlined plans to offer consumers more protection and stop a repeat of the banking crisis.

However, there remains a lack of clarity over who is responsible for systemic oversight, says the report, and who has overall control during a crisis, while responsibility for strategic judgements and executive action was, and remains, unclear.

While the group of MPs stopped short of recommending any immediate changes to the system, it did acknowledge that, in time, action will have to be taken. "When that decision is made," it said, "responsibilities need to made crystal clear, and aligned with powers."

Chairman of the Committee, John McFall, said "The tripartite structure of regulation is in a state of flux at the moment: change and coordination are clearly needed to clarify responsibilities, but the picture is constantly moving."

The Financial Services Authority (FSA) was also slammed for its role in the crisis, with Mr. McFall, commenting: "By any measure, the FSA has failed spectacularly in its supervision of the banking sector, but it has acknowledged this and already begun to rectify its mistakes."

The report also called for the Government to ensure that banks are not allowed to become so large that they cannot be allowed to fail. "Some banks have been able to take advantage of this implicit guarantee to make risky bets," said Mr. McFall. "This has to stop."

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