By Mr Brian Quinn, Executive Director at the Bank of England
Mr Brian Quinn, an Executive Director at the Bank, explains the supervisory role of the central bank. He also discusses a range of related topics, including the distinction between regulation and supervision; the objectives of banking supervision; and the principles which inform decisions on the provision of financial support to troubled institutions. Finally, he explores how these issues may be affected by social trends and associated developments in the financial system.
Mr Quinn concludes that the existing arrangements we have in the United Kingdom for supervising banks have worked well and that, although improvements need to be made from time to time, occasional and exceptional episodes do not justify radical change, as the Bingham report confirmed. Although he does not conclude that supervision must be conducted by the central bank, he stresses the close and inextricable links between the core responsibilities of central banks and the supervisory function-links which are well forged and tempered in the United Kingdom. However, given that the primary objective of the central bank is the stability of the financial system, and not the protection of the consumer, Mr Quinn suggests that changes taking place in society and in the financial system may point to the need for reconsideration, in due time, of the precise definition of the Bank of England's supervisory role.