Bank Reform Plans Slammed As ‘Cosmetic’
Plans to prevent another banking crisis are weak and “cosmetic”, MPs have warned.
Risky trading by City banks was blamed for the financial crisis
The Treasury Select Committee said the body which watches over the banks was “toothless” and in “a muddle”.
It is the committee’s final report on the Government’s plans to overhaul the system for regulating banks.
But MPs were largely critical of the white paper, which was published last month, and said it did not go far enough.
It was the excessively risking lending of the banks that was partly to blame for the credit crunch, which pushed the economy into recession.
The report says that banks that are “too big to fail” should be stopped from risky trading if they were propped up by the taxpayer during the crunch.
MPs also attacked recent changes announced to overseeing the tripartite authority – the Financial Services Authority, Bank of England and Treasury – as “largely cosmetic” and simply a “rebranding”.
The committee said responsibility for strategic decisions and action “remained a muddle”.
MPs warned that the FSA would have to be sufficiently strong to make unpopular decisions once the financial crisis is over.
Chairman John McFall said: “All this is very fashionable now; the FSA must develop sufficient teeth in order to be able to go against the tide in the future and take unpopular decisions.”
The FSA said the committee’s report acknowledged that it had “proactively identified and rectified its historic mistakes”.