The financial regulatory system set up by Gordon Brown in 1997 has been heavily criticised by an influential House of Lords committee and a former Bank of England director for failing to prevent the financial crisis.
The financial regulatory system set up by Gordon Brown in 1997 has been heavily criticised by an influential House of Lords committee and a former Bank of England director for failing to prevent the financial crisis.
The House of Lords economics affairs committee said the Tripartite Authority – which comprises the Bank of England, the Treasury and the Financial Services Authority – failed to protect Britain’s financial system when the credit crunch struck in 2007.
“A key role of regulation is to prevent crises or to mitigate their effects. The present system failed to do so,” said the committee in a report published this morning.
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The committee was particularly critical of the FSA, saying it had focused too much on consumer complaints and not given enough attention to “prudential supervision”.
The FSA was created in the first year of the Labour government, when Brown was chancellor of the exchequer.
Sir Martin Jacomb, a former Bank of England director, has claimed that this “disastrous” decision was driven by jealousy within the Treasury and a desire to rein in the central bank’s power.
In a separate report published by the Centre for Policy Studies on Monday, he wrote: “The Treasury has long been envious of the Bank of England. Viewed from Whitehall, the Bank seems grander, with a long and splendid reputation, particularly internationally, and with relationships with other central banks which give it a special air of authority.”
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Jacomb believes that some senior figures within the Treasury blamed the Bank of England for the collapse of Johnson Matthey bank in 1984, when then chancellor Nigel Lawson was bounced into approving the purchase of the company with little notice.
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