Banking crisis: regulation and supervision, fourteenth report of session 2008-09, report, together with formal minutes, oral and written evidence

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Stationery Office, Jul 31, 2009 - Business & Economics - 126 pages
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This is the Treasury Committee's final report on the banking crisis. The report considers how regulation and supervision have changed, and can be further improved, in order to return to and maintain more stable banking. The Committee considers the reforms to the institutional structure of the Tripartite Committee announced in the Treasury's recent White Paper ("Reforming financial markets, Cm. 7667, ISBN 9780101766722) to be largely cosmetic. There is still a lack of clarity regarding who is responsible for systemic oversight, and who has executive authority in a crisis. But in the Committee's view no new macroprudential responsibilities should be allocated until a decision has been made about the precise tools needed. Examining the FSA's response to the financial crisis, the Committee recognises that the regulatory philosophy of the FSA has changed for the better, though the real test will be when the boom years return. Many banks are systemically significant because they are too big, they conduct many types of business, or they are too complex and interconnected. The report addresses each of these issues in turn, concluding that though it is unlikely that all banks could be shrunk to a size where they posed no systemic risk, the Government can and should still act. On the question of a return to 'traditional banking', the report concludes that it would be intolerable if banks took advantage of the implicit Government guarantee for deposits to take risky bets on proprietary trading.

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