Letter to Evening Standard 11th July 2008

Our Government stresses at every turn the idea that the credit crunch is global. Yet this glosses over the fact it was Gordon Brown who as Chancellor gave the Bank of England its "independence" and all the consequent effects. Intended to make Government work harder to influence interest rates, the most obvious result of the move has been a downturn in the quality of banking sector regulation, now split between Bank and the Financial Services Authority. For example, my company used to get a full list of banks from the Bank of England; but the FSA is unable to produce an authoritative one on the grounds that "the concept of a bank is now not as clear cut", an admission does not instil confidence in a regulator which is being given more and more responsibilities.With the dividing of the Bank's duties, there is no longer a discreet "lender of last resort" with the authority to assist a bank suffering from a shortfall in funding. Nor is there a competent supervisor that would never have let banks borrow short and lend long to the current extent. For the last year, one in seven of the UK banks made a loss. Our Government has nationalised the first bank which got into difficulty and encouraged a peer bailout of the second. It has now run out of options; when the next bank fails (and it will), so will the Government. John Hemming-Clark, editor, Bank League Tables.