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Financial services regulation: House of Lords backs the global option put forward at G20

As the political chaos unleashed by the MPs' expenses scandal continues to dominate the headlines and totally absorb political leaders of all parties, there are some sharp reminders that life - real life - goes on in the world of politics. It was interesting to see in yesterday's Financial Times that business leaders have started to air concerns about just how far politicians have become distracted from the important agenda flowing from the financial and economic crises of the last year. This morning we had another reminder of just how important a debate is brewing up around financial services regulation when the House of Lords Economic Affairs Committee published its report on banking supervision and regulation.
This is a big report with alot to say about regulation and banking supervision, much of it very obvious criticism of the failures of the tripartite regulatory regime and the lack of clarity in the roles of the Financial Services Authority, the Bank of England and the Treasury. I want to look at the contribution the report makes to the wider international debate about the reform of banking supervision. This is buried in paragraphs 128 to 143 of the report under the heading International Supervision.
The House of Lords argues strongly that any extension of supranational banking supervision should be on a global, not a regional basis. It does sympathise with the critique that the European Union's Larosiere Report offers of the failures of the existing mechanisms but rejects its conclusions that the answer is a series of new and strengthened European institutions, arguing instead that the solutions need to be global, not regional. In coming to this conclusion, The House of Lords is lining up firmly on the UK government's side and gives strong backing to the proposal developed by Gordon Brown at the London G20 Summit that a new Financial Stability Board should be established in partnership with an enhanced role for the International Monetary Fund.
In normal times, this would have been seized on by the Treasury as it needs to do find some allies to help it stand up to what looks, at the moment, to be an unstoppable tide in favour of a European solution in the EU. These are not normal times. We have a government paralysed by an unprecedented political crisis with a Chancellor looking increasing doomed. Picking up and reading a lengthy House of Lords' report is not likely to be one of Mr Darling's priorities this week. The pile of reading will only get bigger in the next week as the House of Commons Treasury Select Committee report covering many of the same issues is expected to be published. It is hard to see just how and when these important issues are going to get addressed in the current fevered political atmosphere.

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