THE government yesterday appointed four external members to the board of a new regulator that is meant to replace the FSA and prevent future financial crashes – the Financial Policy Committee (FPC).
It also released a new consultation paper on the committee that some said showed it had scaled down its ambitions for the regulator and given it a more limited mandate.
The four new members, who join seven already appointed from the Bank of England and FSA, are supposed to add an “external” perspective to the interim body, which will be in charge of monitoring systemic risk and working out what tools its permanent replacement will need.
But there is only one businessman among the “external” members: Michael Cohrs. The other three have all spent much of their careers in financial regulation and commentary: ex-CBI boss Richard Lambert and Donald Kohn are both former members of central bank boards, while Alastair Clark has advised the Bank of England for over a decade.
Economist Richard Barwell at RBS also says that the latest document on the FPC “envisages a more modest objective for macroprudential policy” than previous proposals. He says the new mandate could make it difficult for the FPC to halt future bubbles.
THE FOUR NEW EXTERNAL MEMBERS OF THE FPC
AS the only new member of the committee with extensive business experience, Cohrs will add a vital outsider perspective to the formation of the new regulatory system. He spent a decade working at Goldman Sachs 1981-1991, after which he worked at SG Warburg for four years. He was then co-head of corporate and investment banking at Deutsche Bank until 2010. He also holds an adjunct professorship at Beijing University and was a member of the president task for on market mechanisms (the “Brady Commission”) that recommended reforms after the 1987 stock market crash.
RICHARD Lambert recently retired from five years as director general of the CBI, representing business interests. Before leading the CBI, he was on the Bank of England’s Monetary Policy Committee from 2003-2006. In 2003, he wrote a review of business and university collaboration at then-chancellor Gordon Brown’s request. Previously, he had an extensive career in financial journalism, editing the FT’s Lex column, its New York Bureau and, finally, the whole paper. He is also a trustee of the British Museum and Chancellor of the University of Warwick.
ALASTAIR Clark has been in financial regulation for over a decade. He was the Bank of England’s executive director for financial stability 1997-2003 and then became an adviser to the government on the City 2003-2007. He left his role at the Bank of England in 2007 but returned later that year after being asked by governor Mervyn King to help deal with the building crisis. In 2009 he took a role advising the Treasury on financial stability. He is also an honorary visiting professor at the Cass Business School in London.
A FORMER member of the board of governors at the Federal Reserve, Donald Kohn spent 40 years in various roles at the Fed, including helping to craft its response to the financial crisis in 2008. During his time at the Fed, where he began his career as an economist in 1970, he worked as secretary of the Federal Open Market Committee from 1987 to 2002, director of its Division of Monetary Affairs 1987-2001 and, before that, as deputy staff director for Monetary and Financial Policy for four years. He is also a senior economics fellow at the Brookings Institution.