Not content to take a back seat on the bankers gravy train, the Bank of England (BofE) has given itself a budget of £20million towards the cost of fitting out the offices of the Prudential Regulation Authority which is to be the successor for the failed Financial Services Industry – the organisation that failed to see the collapse of world banking despite having the role of ensuring that bankers and bankers could handle the job.
What scares us is that the £20million is allocated ‘towards’ the costs of setting up this new organisation and by inference we can assume that the costs will be much higher. Work on the project is scheduled to begin in 2012 – what’s happening in the meantime?
Since the Bank of England is as much to blame for the banking failure, why is it being allowed to create what is supposed to be an independent watchdog when it may have to turn its attention to the very seat of financial power in England and there will inevitably be a conflict of interest?
It is George Osborne’s intent to place more power in the hands of the Bank of England but is this the right thing to be doing when the previous ‘tripartite’ system which included the Bank of England was such an abject failure; are we to assume that despite being part of the problem which caused the financial global mess that the BofE alone will be able to cope – highly doubtful.
We’re told that the Bank of England is being given control of “macro-prudential regulation” and oversight of “micro-prudential regulation” but what does this really mean? What is does mean is the creation of a new Financial Policy Committee within the BofE as well as two new regulators in the form of a Prudential Regulation Authority who will regulate banks and other financial institutions and the new Consumer Protection and Markets Authority; there is also to be a new single agency to tackle economic crime. So their putting aside one tripartite system and introducing another tripartite system – how much fun is that!
All the new bodies will be responsible to Parliament and the excuse for this given by Mark Hoban, Financial Secretary is that “never again can someone ask who’s in charge and get no answer”. What worries us is that the financial control is now being given over to the politicians. The government says the new system will be completed by 2012 but with work slated to begin in 2012 on the new offices, it is not clear how they are going to achieve this.
Of great concern is that Hector Sants, the current chief executive of the FSA (you know, the organisation that failed so spectacularly to do its job) will oversee the transition and will then head the new prudential regulator.
He claims that the FSA didn’t fail it just didn’t have enough scope and was not aggressive enough and although his resignation was announced in The Telegraph in March 2010 how is it that he is still heading this new regulatory body – all very strange and suspicious.
Only in government is abject failure consistently rewarded; in the real world men and women are constantly looking over their shoulder waiting for the axe to fall or being sacked for minor misdemeanour’s but when it comes to dealing with money from the public purse, the sky’s the limit and no amount of incompetence or failure will lose you your place on the gravy train.
FSA directors claimed £110,000 in expenses over a three year period including £358 for one night’s hotel stay for Sally Dewar, Managing director; while Managing director Jon Pain claimed £545 for a two-night hotel stopover (he even claimed the 70p for his newspaper); chairman Adair Turner spent £812 for two-nights at a hotel, with a total hotel bill of £5,889 between November 2008 and March 2009; Hector Sants himself ran up costs of £11,245 in transport costs over a three-year period when his full-time driver was unavailable.
What’s surprising for a financial institution is that they claim that they do not keep records of expense claims that have been rejected – this is a great mechanism for ensuring that no one gets to see the true level of false and inflated expense claims.