The banking crisis has inevitably led to a debate on how the
UK regulatory system failed and the reforms necessary to put it
right. Two recent reports, one by Sir James Sassoon
commissioned for the Conservative Party and one by Sir Martin
Jacob for the Centre for Policy Studies, suggest that the
structure of the UK regulatory system is at fault and that the
Bank of England should have a greater regulatory role.
Both Sir James's and Sir Martin's reports start from the
basis that the banking crisis was caused, or at least
exacerbated, by the fact that responsibility for financial
stability is split between the Bank of England, with
responsibility for macro-economic policy, and the FSA, with
responsibility for supervising individual firms. The failure of
the two bodies to communicate effectively under the Tripartite
Agreement, devised in 1997 when the FSA was set up, meant that
neither body took...