Photographer: Simon Dawson/Bloomberg

Britain Needs a New Bank Regulator, Report Says

  • Regulators’ failings over HBOS collapse show need for new body
  • Call by lawmakers comes in Treasury Committee probe into HBOS

Britain needs a new financial watchdog to punish wrongdoing in order to win public confidence, further reshaping a regulatory structure that was overhauled just three years ago, the U.K. Parliament’s Treasury Committee said.

A new enforcement body should operate separately from the Bank of England’s Prudential Regulation Authority and the Financial Conduct Authority to help prevent a repeat of the “inadequate” response to the near collapse of British lender HBOS Plc in 2008, the Treasury Committee said in a statement Tuesday. The new organization would be made up of the enforcement departments of the PRA and the FCA, it said.

The recommendation comes in a report by the Treasury Committee into the failure of HBOS, which merged with Lloyds Banking Group Plc in a state-brokered takeover amid the financial crisis. The proposal echoes similar suggestions dismissed by former U.K. Chancellor of the Exchequer George Osborne when he split the Financial Services Authority into the PRA and the FCA in 2013. 

“The HBOS experience calls for the FCA and the PRA to exhibit greater vigilance and energy if they are to win public confidence,” Andrew Tyrie, chairman of the group of lawmakers said in an e-mail. “This has on occasion been lacking.”

Outdated System?

A separate body to penalize recklessness and wrongdoing would serve to “bolster the perception” of the independence of enforcers in Britain’s regulatory system, according to the report. The current system, in which the FCA and PRA supervise banks, while also applying and prosecuting the law is “outdated and can be construed as unfair,” the report said.

This isn’t the first time Tyrie has pushed for a separate enforcement body. He made the case as a member of the U.K.’s Parliamentary Commission on Banking Standards in 2013 and reiterated the call in 2014. He said on Tuesday the Treasury should now “re-examine” the proposal and appoint an independent person to oversee a review.

Various reports into the failures at HBOS have been published since it merged with Lloyds with the combined company requiring a taxpayer bailout of more than 20 billion pounds ($26 billion) in one of the most controversial episodes of Britain’s financial crisis. The FSA faced criticism after it sanctioned only one former HBOS executive, former head of corporate banking, Peter Cummings, and took about seven years to publish a report into failures at the bank.

Before it's here, it's on the Bloomberg Terminal.