Banking Regulation SMACKDOWN!

Perez Hilton vs will.i.am getting too latently homophobic? Jordan’s Twitter beefs wholly unconvincing? Then step up to the bitchfight of the year, with Mervyn King taking on Lord Turner in the battle to see who gets to regulate the UK’s financial industry!

Ok, so it’s not that exciting. But it is pretty important. As we know, the creeping deregulation in the City as the UK tried to woo the world’s financial business has partly contributed to the current stickiness – there’s a determined effort to make sure we don’t allow bonkers derivatives and over-leveraged buyouts, glued together with boozy lunches, to happen any more. But now King, head of the Bank of England, and Turner, head of the FSA (the UK’s financial services watchdog) are arguing over who gets to wield the power over the peskier elements of the industry.

King complained recently that the Bank could only “issue sermons or organise burials” when it came to enforcing bank stability; he proposed that the Bank should be the last word in bank stability, and should be able to override the FSA. He wants the power to go into banks and tell them to stop dicking around and being so risky. Turner on the other hand is saying that FSA staff wouldn’t accept such steamrollery and that King’s proposals would lead to “wasteful, competitive behaviour”. He wants to share the responsibilities by creating a nine-person financial stability committee, placating King by giving him the chair, but having nearly half the members from the FSA. As Andrew Hill in the FT notes, it’s a placatory move that tells King not to lose his rag.

King has also proposed that megabanks with huge investment and retail divisions be broken up, but Turner believes that the investment divisions can stay wed to the overall bank, as long as they hold a safe buffer of capital. 

Alastair Darling could wade in like a fearsome lunch monitor and break up the bickering, but according to the FT, his paper on regulation next week will “steer clear of the turf war raging between Mr King and Lord Turner”. It looks like these two will have to fight it out between themselves, but at least its encouraging to see such zeal for regulation that people are fighting over who gets to do it all. We’ll let you know who emerges victorious.

Posted by Ben Beaumont-Thomas in Hot Money | June 24, 2009 12:36PM |