Lord Myners gives short thrift today to Tory plans to kneecap the Financial Services Authority and transfer many of its powers to the Bank of England.
In an interview with City AM (the freesheet) the City minister says the central bank neither wants nor has the right skills for the job. He portrays the Bank as an ivory tower full of chin-stroking academics.
“They (Tories) have misjudged the competence and culture of the Bank of England. The Bank is a very academic institution. It is not actually about doing things,” he said.
“The Bank is good at looking at the wider picture but it does not want to be supervising and reflecting on individual banks. Do we want the Bank of England distracted by supervising building societies and insurance companies?”
Ultimately the reason why financial regulation often fails is because the smart guys aren’t working for the FSA or the SEC: they are making millions of pounds/dollars in the banks.
Chief executives of banks didn’t understand some of the financial products cooked up by youths with PhDs in advanced mathematics. How can we expect low-ranking regulators to be on top of these innovations?
This point is made in a shrewd letter to the FT today by Tim Price of PFP Wealth Management:
“As to the likelihood of the Bank attracting a sufficiently experienced and qualified staff, this gets to the absolute heart of the problem. Short of receiving infinite remuneration, no regulator will ever realistically be able to compete with the so-called “talent” on Wall Street and the City, even if that talent amounts to self-enrichment rather than wider wealth creation.”