On the failure of supervision by the Bank of England

On June 23rd, 2009, Roger Lawson, Communications Director of the UK Shareholders Association (UKSA), contributed this to our debate:

I plan to talk about the regulatory failures and the failings in the Bank of England that created much of the turmoil in the UK banking sector. This would include the cases of Northern Rock and Royal Bank of Scotland. In the former the FSA have admitted gross errors in regulating it thus allowing them to pursue a risky business strategy, and when the company finally got into difficulties, the Bank of England acted capriciously, not in accordance with its established remit, and in a manner that undermined confidence still further – the result was the first major run on a bank for over a 100 years. In the case of Royal Bank of Scotland the company was also allowed to pursue a risky strategy with wildly excessive levels of “leverage” which resulted in this venerable institution having to be bailed out by the Government at massive cost. This has destroyed the capital and income of tens of thousands of people.

The Bank of England failed in its responsibility to properly supervise the banking sector which allowed these and other banks to pursue investment strategies that were highly risky, and to develop new “financial instruments” which nobody was regulating.

Here’s the link to the video recording of our Forum meeting on June 23rd.

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