A consultation on proposals for strengthening the current framework for financial stability and protecting depositors – “Financial stability and depositor protection: strengthening the framework” – has been launched by the Chancellor of the Exchequer.
The consultation document is published jointly by HM Treasury, the Financial Services Authority and the Bank of England.
Following the recent period of turbulence and instability in global financial markets, the consultation document sets out the authorities’ proposed action, both in the UK and internationally, to achieve five key objectives.
The objectives consist of: 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,
“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. The government is determined that its response is proportionate and appropriate and will therefore consult actively on these proposals, seeking discussions with financial institutions, consumer representatives and counterparts from across the world, to ensure that the final arrangements are effective and deliver the five objectives set out here,” says Alistair Darling, chancellor of the exchequer.
“Financial stability and the protection of depositors are essential components of a healthy economy. Northern Rock exposed serious weaknesses in our current approach, and it is vital that we draw the right lessons from what happened. It will also be very important to avoid any knee jerk responses, or the kind of heavy handed regulation that would kill competition and innovation in the financial services sector. So we welcome the Government’s decision to consult widely on its proposals, and we look forward to making our own contribution to the debate,” says Richard Lambert, director-general, CBI.