News Release
Financial Regulation: Why, How and by Whom?
03 October 1996
(Lecture by Howard Davies, Deputy Governor of the Bank of England, given to the Centre for International Banking, Economics and Finance, John Moores University, Liverpool.)
In this lecture, Howard Davies examines two of the objectives of financial regulators - to protect the economy against systemic risk; and to protect individual depositors and investors against loss. He also explains how the Bank has sought to draw the lessons of the Barings collapse, to strengthen regulation where needed, but without imposing unjustifiable burdens on the financial system.
Referring to the Bank's recent review of banking supervision, he says:
"We are ... still very committed to a style of supervision which relies critically on the high quality both of our staff and of the supervisory tools that are available to them."
On the structure of supervision, he says that the Bank remains unconvinced by arguments that there should be one regulator of both banks and securities houses:
"We continue to take the view that banks are a unique type of financial institution. That is not to say that market evolution may not mean that, in due course, the case for merging banking and securities regulators became stronger."
He says that banks engage in a high degree of maturity transformation, which means that their balance sheets are clearly different from those of securities houses. Further, banks are central to the payments system, which means that their failure can have a profound impact on the wider economy.
In terms of the current priorities for the Bank, attention, he says, is focused in two directions: "These are to ensure, first, that, given the regulatory structure, costs are minimised, and second, that co-operation between regulators is based on a clear understanding of responsibilities and the free flow of information".
A copy of the speech can be obtained from Public Information and Enquires Group on 0207 601 4878.
