November 3, 2011 / 9:56 AM / 8 years ago

HIGHLIGHTS BoE's King in UK parliament hearing on regulation

LONDON, Nov 3 (Reuters) - Comments from Bank of England Governor Mervyn King, Deputy Governor Paul Tucker and Andrew Bailey, Deputy Chief Executive designate of the Prudential Regulation Authority during a question and answer session in parliament on Thursday:

ON ACCOUNTABILITY:

“A key point I’d make to you is that there’s a big difference between consultation and accountability.

“We should not be accountable to the industry, we should be accountable to parliament and the public.

“We should consult the industry and you should be able to ask the industry ‘do you think the regulator is doing its job, did it consult you appropriately, is it carrying out its task in a fair and sensible way?’.

“But I don’t think we should be accountable to the industry - that’s the slippery slope to regulatory capture which was one of the major problems leading up to the crisis.”

KING ON SUPERVISORY STRUCTURES:

“The only one (responsibility) that you could conceivably take away that would make sense would be the PRA. I think the MPC and macroprudential is intextricably linked with the sort of issues that central banks are bound up with. If you feel it’s too much, then the PRA is the body that you should take away from the Bank of England.”

KING ON HARMONISATION OF EU BANK CAPITAL RULES:

“I think the Commission have got themselves in a position, where, as I said, for reasons to a large extent of theology this has become something they find hard to back off.

“But I very much hope they will reconsider it because I don’t believe that abandoning maximum harmonisation would in any way undermine the single rule book, or what they’re trying to achieve in Europe or a common regulatory framework. I can’t understand why this is an argument people are pursuing to this stage.”

KING ON ROLE OF BANK’S COURT OF DIRECTORS:

“I think it will be a mistake to think that a body like (BoE) Court (of Directors) should be the vehicle for holding us accountable for policy. It seems to me that we should be accountable for policy, decisions of the MPC, the FPC and the PRA to parliament and to the public.”

KING ON CAPITAL REQUIREMENTS FOR BANKS:

“The (European) Commission’s current proposal is still, they want to impose maximum capitalisation (on banks) and I’m completely baffled as to why they want to do it.”

KING ON RING-FENCING OF BANKS:

“To what extent should the definition of a ring-fence be a role for the regulator as opposed to a role of parliament in setting out the legislation? ... My view quite strongly, our view is that as far as possible it should be down to legislation and not left to the regulator.”

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