Lawmakers criticise Brown’s regulatory system

LONDON – British lawmakers criticised the tripartite system of banking regulation established by Gordon Brown in 1997 when he gave independence to the Bank of England, saying it contributed to the current financial crisis.

The House of Lords Economic Affairs Committee said in a report yesterday that the tripartite system, comprising the central bank, the Financial Services Authority (FSA), and the Treasury, had failed to provide adequate surveillance of the financial system as a whole.The committee said the FSA had focused too heavily on its consumer protection role, while failing to take sufficient steps to alleviate risks to the financial system caused by excessive debt and banks’ ventures into complex and opaque financial instruments.It also pointed out the Bank of England had reduced the number of its staff working on financial stability.The committee stopped short of calling for the end of the tripartite system, but said that responsibility for macro-economic supervision should be returned from the FSA to the Bank of England.’We need to acknowledge that the regulations and their application contributed to the crisis, and made it worse when it came, because among other things, they had a pro-cyclical bias, did not pay enough attention to liquidity, and were wide open to regulatory arbitrage,’ said Iain Vallance, chairman of the committee and a member of the opposition Liberal Democrat party.Vallance said changes needed to be made quickly to restore confidence ‘and the international competitive position of the British financial services industry.’Brown, now Britain’s prime minister, created the tripartite system as Treasury chief in then-Prime Minister Tony Blair’s newly elected Labour government.-Nampa-AP