Overhaul Banking System

Overhaul Banking System

In light of the liquidity crisis, Paul Tucker, head of markets at the Bank of England has called for a revamped regulatory approach to banking that reflects the global nature of modern markets.  He also suggested there should be a gradual reduction in interest rates.  

In a recent speech, Mervyn King, governor of the Bank of England said “Central banks are at the heart of efforts to restore confidence in the banking system through the provision of liquidity against assets which have proved to be illiquid”.  He also added “It is too early to determine what the long-term policy direction will be but some serious thinking and a willingness to consider radical change will be necessary”.  These comments echo those of Henry Paulson, secretary of the US Treasury, who is proposing that the Federal Reserve should regulate the US mortgage market.  

Our view

This is not the answer, if nothing else it will undermine competition.  We suggest that the financial services regulator, the Financial Services Authority, should be given more powers to monitor ‘high market impact’ institutions such as banks to ensure that they are being run properly with restrictions on excessive or high risk lending and likewise savings rates that cannot be sustained.

Useful links:

Request expert financial advice now

Purchase guidance on financial planning in the Money Shop 

Back to News Summary