Βι¶ΉΤΌΕΔ

> Where he may face criticism is whether - with the financial system
> still so fragile - this is the best possible moment to distract
> regulators from their fairly important day-jobs.

When you can set up strong regulation, you don't want to. And when you want to, you can't...

My Question is very simple: How much will his reorganisation cost and hoow long will it take to recover these costs?

Eurozone collapse would most probably precipitate a long and deep depression - the like of which has never been seen before.

I really do question the wisdom of commentators to continually speculate on such matters. It may be slightly more probably than a collapse of the US Dollar zone, but not much more. Why not look at the failure of the Chinese to let the Renminbi increase in value?

By far the biggest risk is the inability of the Bank of England to raise interest rates to push down on inflation and the consequent real risks of a hugely damaging and dramatic increase in asset price inflation - already running at over 10%. Rates must clearly rise in a rational World to stop this boom in its tracks - but the Bank of England seems to have turned its blind eye to the problem as it has done for the past decade - and that is the direct cause of the tripling in personal debt in the last decade - an absolute disaster, but without prompt action that is exactly where the Bank of England is leading us all - to hell in a handcart!

The Madness of King George.

Osborne's got it right, especially on the Eurozone. Fat lot of good its been... Wrong on financial markets, wrong on globalisation, incapable of curbing corruption within its ranks, muddled on the . I suppose that Europe has at least been at peace since '45 - sort of... if you forget about the Cold War... and erm... is it all thanks to the EC anyway?

Did Merv King do any better than the FSA? Extremely doubtful as he did not recognise the financial bubble or take appropriate timely action on interest rates. He weasled himself out of any blame during his evidence to the Treasury Finance Committee and was supported by Fallon who must be very disappointed not have been appointed the new chairman.

Moderators too busy, working on OBR?

Does this really explain 'What happens if eurozone implodes?'

It is obvious the person writing this article has no idea about the workings of the FSA. It is a mish mash of silos, run by mini emperors trying to carve out their own niche.

Breaking up the FSA into two components; one dealing with financial regulation of companies and one dealing with advice to consumers, is long overdue and would be very easy. Departments within the FSA rarely if ever talk to one another, have little idea of what other departments are up to and are an excellent example of Brown's repeated attempts to inflate the public sector with jobs for unions.

The FSA should be there to protect consumers. Companies have their boards and corporate governance - active shareholder participation and BOE oversight is a far better way of regulating company activity than the FSA.

Why does the word "eurozone" appear in the title of this article?

When was the last FSA internal reorganisation?

Did that reorganisation integrate further the very functions the Government is now seeking to separate?

If so, is that the equivalent of a poision pill tactic?

So we are heading out of recovery into another downturn and at the same time Bertie Wooster is going to send the financial regulator into melt down.

Labour brought the whole of state sector to it's knees with constant re-organisation, merger and interferrence. Once again it sounds like this lot are no better.

Even former regulators who have also been BofE chiefs admit that they "got it wrong" and that this is an opportunity to improve things, lord knows how you do that when the same old regulators are involved!!

Sorry to quibble. I think you meant 'discrete' rather than discreet. Very confusing as 'discretion is the better part of valour' suggests opposite meaning.

Discreet: tactful, inoffensive
Discrete: Separate and distinct

All this user's posts have been removed.Why?

Robert says: "...to prevent the FSA imploding in the last two year's of its existence."

Again, incorrect use of the apostrophe

This doesn't wash.

FSA has an appalling record and its adoption of a principles based rule book was manifestly ill-conceived and completely unfair.

Their miscreant executives have been and are being let off the hook by being allowed to cut and run. It is certainly not fixed.

As to timing, the sooner prudential control of banks is passed to the Bank of England - the better.

Effective regulation is about having a clear, concise set of rules, and a team of regulatory staff who have extensive industry experience to do their work properly. FSA had neither.

Breaking up FSA should not prove difficult - its an unco-ordinated behemoth.

If, well when the Eurozone collapses, things will change.
As all the Eurozone is anyway is an extremely ill fitting bookkeeping system what should happen is that the Eurozone countries should move to use a modern bookkeeping
system like .
What is more likely to happen though is that the dark forces - Bilderberg etc will use this inevitable collapse to move to dramatically further their centralisation of power grab :
"Quick ! panic ! Give up your Democracies" "look you've run out of numbers on a dusty old Ledger !"
"Let us clever people scientific people tell you want to do instead !"
So it's :
path A) Nutter invents daft system that's going to break. Daft system breaks. Result - nutter gets sacked and his system gets replaced with

or
path B) Nutter invents daft system that's going to break. Daft system breaks. People hand what's left of their freedom and wealth to nutter so he can have another go.

I may be being a bit thick, but could someone explain the link between the headline & the rest of the article?

If the Eurozone collapses then the cities financial sector has won.
They go back to speculating and trading in numerous currencies as before.
Currency traders have always hated the one common currency it restricts their ability to make money on currency trades.
Its fairly obvious they had some role in bringing the Euro to its knees, just shows the power that the market or city has. While in China the currency is heavily controlled to stop such damage to manufacturing businesses.When a currency trader speculates on a currency a business in the "real world economy gets damaged".

Glad someone has recognised that the decent FSA staff are all likely to leave as a result of this. Most of the good staff have been victims of the credit crunch, hired in the last few years, but willing to take the lower paid FSA jobs to build up connections throughout the industry, I guess this will just fast-track their plans to return to the market, and the FSA will be left with the folk who where there pre-crunch.

Considering the utter incompetence they showed in handling the Equitable Life affair, this is not a moment too soon.

And perhaps they should not be looking at reshuffling people, rather sacking the lot and starting again. Such is the reward for incompetence in the real world outside the bloated public sector.

What I would suggest is a full department that is composed of qualified accountants and traders to police the system. But there lies the problem you are in effect hiring a poacher to become a game keeper.
They will always cover one another's backs in any form of "internal investigation". When you are telling with complex investigations you need people that understand the markets and the products being sold.
Its the number of Ponzi schemes that have been unearthed that worries me, and the recent mortgage fraud cases were property valuations have been rigged etc.
How can a body be independent yet have full knowledge of the internal workings of the city? A fraud squad is already established at New Scotland Yard but do you ever hear of the cases being brought to prosecution?
Police force has to be involved somewhere to give the watch dog actual teeth!, to arrest and prosecute mis dealings.

"The word to focus on is "integrated", which means that breaking it up won't be quick or easy. "

Nah - what are you on about Robert - a quick swipe of the hatchet and it's gone - so there may be some areas which don't get regulated for a while as the BoE tries to work out what it's new responsibilities are (it still doesn't know it's last set of responsibilities - and now it's got to learn new ones??)

Luckily I'm sure the coalition will spell it out all neatly for them so there are no mistakes.......surely?

20

The Euro has been damaged by the fact that you can't just mould together the economies of Northern and Southern Europe, and expect it to work with one interest rate, when they have completely different outlooks and requirements

Simple as that

6. - I think you'll find Merv King did say borrowing was too great, but he didn't raise interest rates because he didn't see the crash. Gordon Brown depended on the growth of the financial sector for his 25% of GDP tax take to fund his spending spree (and I might add the 2% growth linked pension for each MP). If he'd heeded what Merv had said the regulation 'may' have been put in place earlier - he didn't want it though. It wouldn't have stopped the crash but his general imprudence with borrowing was thought ok at the time. Merv did point that out so give him credit.

Sorry, Robert but this all sounds like special pleading.

The FSA blew it when we needed it: nothing more needs to be said.

I quite like the idea of very clever, expensive people getting the chop for organisational failure. It might just catch on.

We should all be worrying about our jobs, wishing to do better and asking ourselves what more needs to be done. We used to call it professionalism. Now some of that would not go amiss in the City and elsewhere for that matter.

RP: 'To begin at the beginning, the FSA was created in 1997 to be one of the world's first truly integrated regulators.'
------------------------------------------------
There was I thinking it was formed in the 1980's around the time of Big Bang amidst warnings that there were going to be holes in the regulatory functions in the UK at the same time the financial services were being, er .. ahem .. 'liberalised' .. in fairly radical ways. Seem to recall the Major Govt. gave it a tweak or two before Gordon Brown re-organised it at the time of giving the BoE power to set interest rates independently of HM Treasury.

RP: 'Nor will it be a walk in the park to establish a new Economic Crime Agency - because that will entail the merger of the FSA's arm that investigates and prosecutes financial crime with the Serious Fraud Office and with relevant parts of the Fraud Prosecution Service, Revenue and Customs and the OFT.'
----------------------------------
Would it be an awkward question if I ask about getting rid of quangos, saving costs and the possibilty of a triangular merger between the Fraud Squad (under resourced), HMRC (under resourced for Customs investigations) and the FSA (overpaid but underperforming) to create a new unit (no doubt in new buildings with new computer systems and layers of new executives - no doubt employed on contracts with bonus provisions) thereby creating more holes for the crooks and fraudsters to slip through?

Whoops, sorry! Just slipped into cheerful cynic mode, must have pressed the wrong button of the computer ... or something.

FSA was formed in 1985, it was called the SIB at outset, name was changed in 1997, nothing new, same regulators on board all the way, different office. Ever decreasing circles spring to mind, but I don't know who will get to the vanishing point.

Is regulation 30s style bust? Is it socially useless, what have the regulators done for us? Simply increased the magnitude of the failures?

#20 keithRodgers

"If the Eurozone collapses then the cities financial sector has won. They go back to speculating and trading in numerous currencies as before. Currency traders have always hated the one common currency it restricts their ability to make money on currency trades."

#25 kevinb

"The Euro has been damaged by the fact that you can't just mould together the economies of Northern and Southern Europe, and expect it to work with one interest rate, when they have completely different outlooks and requirements"

I've often wondered if Europe could have taken a somewhat different approach. A sensible aim would have been to seek to remove volatility in exchange rates whilst still allowing each country as much freedom as possible to deal with its own "outlooks and requirements".

Perhaps one way this could have been achieved would be to have retained separate currencies for each country, but instead of floating on the currency markets to have hard linked them at purchasing power parity to each other (adjusted say on a monthly basis). Under such circumstances it would seem that real interest rates in each country would have to be the same (determined by a European Central Bank), but there would be no need to have a common fiscal policy as variations in inflation would be catered for.

If the Euro does implode, would it be possible to build something like this out of the wreckage?

This seems to me like a total waste of time and money. As Peston says, the regulator is now working (albeit late and with lessons learnt). The FSA is not funded by the tax payer and one wonders how much of the public purse will pay for the new bodies set up as a result? Why cause more uncertainty in these times of fragile recovery.

I am a bit non plussed with this article, Robert. The majority of the article is given over to why the FSA is now performing and now is not a good time to changer their remit. And then there is one liner on the Eurozone risks and why now is not a good time to reorganise it's function.

Let's face it the FSA was asleep before the crisis hit. It allowed the patently absurd takeover by RBS of ABN- Amro, just at the moment when it was obvious the world economy was going pear shaped. So why now praise it - horses and stable doors come to mind.

Unless I am mistaken, if the Eurozone implodes, what can it do about that - the next horse is already waiting to bolt the stable - so it's too late.

Osborne is right if he reorganises it now. We face a new austere economy with new challenges and the sooner the FSA is properly refocussed the better.

31

The most likely outcome in my view, is that the Euro will end up consisting of Germany, France and the Benelux countries, with maybe the others in a second tier Euro, with a floating local currency

However, the split between France and Germany may completely knock it on the head, although unlikely

Thank goodness we weren't stupid enough to join

I am very much against a USE, and we need to stay independent from fiscal union

I have worked in financial services since the 1980s and I look upon the FSA as a thoroughly incompetent organisation.

The FSA seems to have done nothing to protect our financial services industry from the US sub-prime problems, nothing to warn savers of the risks to their banking deposits, nothing to prevent our banks becoming too highly geared, nothing to help the banks to recover (that was the BoE and HMT that led the re-capitalisation programme) etc. England and the City needs a much smarter supervisor than the present day FSA.

We should close the FSA and that should be useful as a warning to other public bodies. Perform or lose your jobs.

This is rubbish! All the "difficulties" and "barriers" are defined in terms of the status quo. The status quo is quite demonstrably not fit for purpose. It must must be changed.

Ergo, no difficulties.

# 32 Max_Cat says - The FSA is not funded by the tax payer and one wonders how much of the public purse will pay for the new bodies set up as a result?

True - but the consumer is invariably at the start of the FSA food chain. We use banks, we invest or our pensions are invested and the investment managers are regulated; investment advisers are regulated and so it goes on.

What evidence there is to say that the regulator is working? We don't know what they are missing each day.

The whole basis of their regulatory approach through principles based regulation is ill conceived and morally wrong. The sooner they are consigned to history - the better.

So what does happen if the Euro implodes?

To quote the headline, "...What happens if eurozone implodes?", I am none the more wise from this Blog entry and header?

Should I exchange my holiday leftover Euros now or wait a bit?

I cannot believe George Osborne. I know I will talking sense and no one will listen. But the decision to scrap part of the FSA’s powers and give them to the Bank of England – hub of the greedy bankers - is an absolute no-brainer, and just shows how stupid this government is. Why doesn’t Osborne just give the powers to the City and let it regulate itself. I know what Siralan would say: Osborne, you are fired!!!

#38. Menedemus wrote:

"So what does happen if the Euro implodes? "

Let us get this straight - a successful Euro is critical to the UK**. Those who hope for its demise are seeking to harm the UK. We must therefore hope that the Euro thrives.

** I could go through at length just how important the Euro is to the UK, to the City and to all UK exporters, to the food distribution business etc. but as some of the rabid loonies on this blog would object and the rest of us understand, it would be superfluous.

#31. random_thought wrote:

"I've often wondered if Europe could have taken a somewhat different approach. A sensible aim would have been to seek to remove volatility in exchange rates whilst still allowing each country as much freedom as possible...."

One of the main benefits of a single currency is the certainty it brings to buying and selling - removing volatility might go some way towards that. However the other benefit to the rest of us is that the Banks are not involved in making a turn on every inter-currency transaction and you scheme would be a disaster on this count. Your scheme would let the banks rip us all off - is that what you really want? But it is good that you are thinking about the nature of currencies. Pegged currencies are generally quite expensive to run and provide mainly disadvantages without many advantages (see for example the various pegging of Asian currencies in the recent past.) One of the main disadvantages is that you have no say at all in the running of the currency to which your currency is pegged.

For business and the general public the best thing is a single currency - in the end only the banks benefit from flexible exchange rates. That is why they have been campaigning against the UK joining the Euro ever since it was conceived. They campaigned for the 'time is right' idea to put off the inevitable. Perhaps you work for a bank and view the world as a banker does, but I don't, so not only am I concerned for the well being of the Euro, but from an economic efficiency standpoint we must eventually join. But perhaps you love the banks!

6. At 3:16pm on 14 Jun 2010, Dubbledorf wrote:
Did Merv King do any better than the FSA? Extremely doubtful as he did not recognise the financial bubble or take appropriate timely action on interest rates.
I was under the impression that Mervyn King had made comments about the housing market. The prime minister of the time would not be drawn on his comments. So was there pressure from central government?

Here is another speech from the "Quiet man" Of some historical interest if nothing else
[Unsuitable/Broken URL removed by Moderator]

I wonder what the Euro president Rumpy pumpy thinks of this news about his own country never mind the Euro.

The FSA hasn't worked. Proof of the pudding and all that.

A genuine financial consumer watchdog would have identified 5-6 times joint income mortgages as being pure vehicles of mis-selling. And as for self-cert, lending Β£100s of thousands to people who don't have to prove they can pay it back is just mad. No wonder the banks involved and those gambling on them are in such trouble today.

6. At 3:16pm on 14 Jun 2010, Dubbledorf wrote:
Did Merv King do any better than the FSA? Extremely doubtful as he did not recognise the financial bubble or take appropriate timely action on interest rates. He weasled himself out of any blame during his evidence to the Treasury Finance Committee and was supported by Fallon who must be very disappointed not have been appointed the new chairman.

Agree about that. Merv must have seen the bubble(s), particularly the housing one and the personal indebtedness but did nothing.

He seems to be doing nothing again though inflation is rife what with his money-printing policy, extra tax on petroleum products that'll affect everyone who buys anything delivered by road.

He claims inflation is likely to go down during this year...but on what basis? I would sooner he dealt with what is actually there, not what he thinks should be there.

Putting regulation back in the hands of the B of E is fine by me but I don't think Mr King is the one to do the regulating. He's great in times of credit expansion (obviously) but I don't know about severity.

It's a bit late to claim the FSA is now performing better. Where was it when the signs of crisis were looming and obvious? Asleep? On holiday? What are they missing even now? Everyone can perform better when faced with the sack.

Whilst one could say this speech has an element of hindsight I do not believe that from looking back at the comments made by Mervyn King that he was completely unaware or supported much of what went on.

If the URL was broken will this link be OK for the speech given by Mervyn King to the Reform of the International Monetary Fund Monday, 20 February 2006 regarding risks to countries economies from exposure to each others economic management and how the IMF should have a part in the control of the transparency of countries economies. That analysis should
lead to an assessment of the risks to the world economy as a whole..
[Unsuitable/Broken URL removed by Moderator]

Re Eurozone implosion.

More of an explosion perhaps with UK, US & China hit by the shockwave.

See this in today's Telegraph

Also this

Much is rightly made of the reckless lending for houses. Can we expect the banks to be overwhelmed by equally irresponsible loans for commercial property?

Finally having read an article ( re an Illinois teacher's pension fund which speculated and lost a shedload, Are there similar problems here and in the Eurozone for pension funds & local authorities (I seem to remember reading an article that Milan, like Greece, had an unwise relationship with Goldman Sachs and credit default swaps.

twinturbo

40. At 10:09pm on 14 Jun 2010, John_from_Hendon wrote:
#38. Menedemus wrote:

"So what does happen if the Euro implodes? "

Let us get this straight - a successful Euro is critical to the UK**. Those who hope for its demise are seeking to harm the UK. We must therefore hope that the Euro thrives.

** I could go through at length just how important the Euro is to the UK, to the City and to all UK exporters, to the food distribution business etc. but as some of the rabid loonies on this blog would object and the rest of us understand, it would be superfluous.

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I would have thought the City would welcome the break up of the Euro. It would provide opportunities to make more money. Businesses who import/export with Eurozone countries (and through those countries) will be the ones who are not too pleased.

As far as everyone else is concerned, then it is harder to take a view. We may be slightly worse off with more 'cost' bouncing around the world system for a short while, but the extra intra-national economic elasticity provided by a return to national currencies may reduce the effect of 'boom and bust' or eliminate it from some better managed economies, ie. there will be scope for more 'Switzerlands'.

A failed Euro to the UK would be something of an economic justification and, in effect, would be a feather in Gordon Brown's rather unadorned cap. Hopefully, a lot of people on the Continent would then be saying "Maybe we should listen to those sensible Brits and reform the EU into a trading club, thereby cutting costs for everyone."

This comment was removed because the moderators found it broke the house rules. Explain.

I suspect that the reason Mr Osbourne's friends in the City want regulation transfered to the BoE is not the logic of giving the Bank more levers with which to steer the financial system, but the fear that the FSA might become too good at its job.

Is it not clear that Gordon Brown's setting up of the MPC, giving the Bank independent control of the base rate failed? Giving the Bank more independent powers does not seem to be wise.


The fact that the City welcomes Osbourne's proposal, as they welcomed Brown's, is evidence that they look forward to a future of light regulation and expect that the rather sensible proposals for tighter regulation made by Lord Turner will be forgotten.

Our elected politicians and the government should be directly responsible and accountable for the health of the economy. Overall control should not be delegated to a quasi private organisation. The Treasury may not be perfect, but at least its actions must be signed off by government ministers, who must in turn answer to Parliament.

I take issue with the statement that the FSA is independent of government. Firstly, the FSA's web address is fsa.gov.uk and secondly Adair Turner is reported to have admitted publicly that the reason the FSA looked away from what the banks were getting up to was because it was so instructed by the Treasury.

That aside, if the FSA is not answerable to government ~ and it's patently obvious that it's answerable to no one else, least of all the financial services industry ~ then it's hard to imagine a more dangerous state of affairs. A Statutory Code of Practice For Regulators exists (and statutory means it's the Law of the Land) but the FSA routinely and brazenly ignores it and no one even attempts to hold it to account for so doing. So we have the extremely unhealthy scenario of a completely unregulated regulatory quango that sets its own agenda and policy strategies and any one or any body that disagrees can basically go jump off a cliff or be trampled underfoot like some tiresome, inconsequential insect. That HAS to change and we can only hope that in creating the CPA, the current government takes due account of this rather than merely hiving off a segment of the FSA and giving it a new name but otherwise with no changes to its constitution and rules of conduct, not least in terms of how it treats the industry that's forced to fund its very existence.

The list of current FSA practices in urgent need of drastic reform (many should simply be stopped outright) is long, though a good place to start will be how the regulator manages its finances, i.e. how it is permitted to spend our money. Salary levels need to be significantly reduced, bonuses should be stopped, golden parachutes outlawed, money spent on objets d'art stopped, 70% of the workforce relocated to vastly less costly premises, the sums of money blown on outside consultancies massively reduced and so on. Oh yes, hindsight reviews should be outlawed and financial advisers should be allowed the protection of the longstop rule rather than being left exposed to responsibility for redress until the day they die in respect of business transacted possibly decades earlier. The FSA has steadfastly dismissed all calls for this to be reconsidered and for advisers to be granted the same legal protection as all other citizens of the land. Why? Malicious persecution many would say.

This could be an opportunity or long overdue positive reform of the current gravy train regulatory system. Let us hope this government is up to tackling the job properly and comprehensively.

14# & 16#
Too many pedants spoil the broth!

The FSA has been flawed from the start and has certainly not been fixed. If its role is to measure and limit risk it has clearly failed. It it is to protect the public it has failed. What it has done has created a hugely expensive bureaucracy that until now is self absorbed and self perpetuating. It's approach has been accounting based, where reality (and risk) is glossed over if the correct forms have been filled in and returns filed, rather than ask the right questions of the right people. To perform its function it has ignored bankers and hired armies of accountants who would not know a risk from riscicle. When the BoE was the sole regulator it knew the differnce between market risk and reporting risk and when it spotted something acted without fanfare or mountains of paper. In setting up the FSA, it would have been wise to follow the example of FDR when he set up the SEC and appointed Joseph P Kennedy, a man many at the time thought was more than a bit shady. FDR replied with the famous "set a thief to catch a thief". Somehow the FSA and the modern day SEC forgot that lesson in the rush to over regulate and regulate badly. The whole regulatory function needs to be sharply focused in terms of purpose and who is to be regulated. There are whole hosts of functions that do not require regulations and firms that need no or little regulation by a financial regulator. This would even include corporate finance advisors who neither trade, hold customer money nor deal with the public. Do they need expensive regulation, undoubtedly not. If they do not serve their clients well, they are out of business. Do car dealerships need to be regulated by the FSA, just because they handle customer money. Doubt it. Maybe a consumer protection agency but not a financial regulator. In short the FSA became too big too fast and failed to know who, what and how to regulate.

26# "Merv did say" "Merv did point out"

See anything similar here? Yes, inaction, sorry no credit due.

55# Your admiration for the SEC setup is misplaced since it did nor recognise the biggest Ponzi scheme of all time despite being warned over a few years of its existence.