August 4, 2010, 3:30am
THE coalition’s plans for financial reform will do little to benefit supervisors, banks or the stock market, according to research by the free-market think-tank the Institute of Economic Affairs (IEA).
Any replacement of the FSA will not prevent financial scandals, the IEA argues in a research paper, which says UK regulators have historically lacked proper accountability.
The IEA contends that the Bank of England should have the power to regulate banks with a deposit-taking function, but should monitor capital requirements instead of introducing a banking levy as suggested by David Cameron’s government. It argues hedge funds and investment banks would be more efficient if left to self-regulate.
The report says the Treasury’s plans for regional stock markets could be an ideal test case for self-regulation, and points out that the UK markets were self-policed until 1986.
The report’s co-author, Philip Booth, said: “If the coalition genuinely wants to create better regulation, along with more competition and cheaper capital for companies, they should scrap the FSA and the vast majority of its functions and leave the sector to itself as far as possible.”