Darling: Govt must play bigger role in market
Chancellor Alistair Darling has announced a new banking reform bill to supervise the banking system in his speech to the Labour party conference.
“We need to strengthen global supervision,” he said.
“It’s clearer than ever that markets cannot do this on their own.
“We are putting in place the tougher financial regulation no one can doubt we need,” he continued.
“It is why I will introduce a new banking reform bill in the Commons in a fortnight.
“Strengthening the supervision of the banking system. Making it easier to intervene if a bank gets in trouble. Giving new powers to the regulators.”
Mr Darling also suggested a wholesale reorganisation of Britain’s current economic regulation system may be necessary.
The UK has relied on the ‘tripartite’ regulatory system of the Bank of England, the Treasury and the Financial Services Authority (FSA), but that system has come under criticism following its failure to predict the Northern Rock collapse and for being sluggish in its response to last week’s crisis.
Mr Darling came close to admitting that today.
“I have asked the new chairman of the FSA to review urgently what we need to do to improve the system,” he announced.
“I can promise that wherever weaknesses are found in the financial system – whether in the powers of government, the Bank of England or the FSA, I will take steps to deal with it.”
The speech confirms a noticeable shift in Labour’s attitude to the market, since last week’s financial crisis provoked outrage at the mistakes of senior bankers and the actions of speculators.
There were also signs the government was beginning to harden its attitude towards what many see as excessive City bonuses.
“We need to look as well at the culture of huge bonuses which have distorted the way decision are made,” he said.
“It’s essential that bonuses don’t result in people being encouraged top take on more and more risk without understanding the damage that might be done, not just to their bank, but to the rest of us in the wider economy.”
It was unclear exactly what action the government could take, however. Critics argue any attempt to control bonuses through legislation would be unthinkable.
Mr Darling ended the speech by referring to the controversy surrounding his interview to the Guardian, in which he claimed – contrary to the message from Downing Street – that the UK was facing its worse economic crisis for sixty years.
“I’ve made headlines by saying just how tough times are,” he said.
“I draw little comfort from the fact that many people now understand what I meant.”