The financial services industry has welcomed a consultation on proposals to improve the systems currently in place when banks run into trouble.
Both the British Bankers’ Association (BBA) and the Financial Services Compensation Scheme (FSCS) have praised the proposals, put forward today by the HM Treasury, the Financial Services Authority (FSA) and the Bank of England.
The document outlines five key objectives for both the UK and overseas. They include:
- strengthening the stability of the financial system, both in the UK and globally;
- reducing the likelihood of banks facing difficulties;
- reducing the impact if, nevertheless, a bank gets into difficulties;
- providing effective compensation arrangements in which consumers have confidence;
- strengthening the Bank of England, and ensuring effective coordinated actions by authorities, both in the UK and internationally
In a statement, the British Bankers’ Association says: “We will work closely with the government on developing its proposals to ensure a more effective system of regulating and overseeing the financial services industry.
“The aim must be to end up with a regime which protects the customer while allowing banks to continue to operate effectively and competitively in the global marketplace.”
Loretta Minghella, FSCS chief executive, says the consultation marks the next stage of an important debate about financial stability, banking regulation and the underlying framework of UK compensation.
“We welcome this consultation and see it as part of a constructive debate about effective depositor protection.
“Whilst the current FSCS model has worked well, the proposals recognise that the current statutory framework does not enable FSCS to pay compensation speedily in the event of a larger banking failure.
“The consultation document proposes a package of new measures which, taken together, are designed to address the issue head on.”
The consultation runs until 23 April and is intended to feed into legislation in the spring.
Launching the document, the Chancellor of the Exchequer, Alistair Darling, said: “Recent months have seen a period of sustained turbulence and instability in global financial markets, with financial firms across the world affected.
“A response to these episodes requires action, not only from the UK Authorities, but also from international firms and institutions.”
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