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17 February 2011

Government announces appointment of external members to the Interim Financial Policy Committee

The Government and the Bank of England today announced that Alastair Clark, Michael Cohrs, Donald Kohn and Sir Richard Lambert have been appointed to the interim Financial Policy Committee (FPC) as external members.

The interim FPC is being established to prepare the ground, in advance of legislation, for the creation of the FPC as the body responsible for the stability of the financial system as a whole, addressing one of the main flaws of the current regulatory framework. 

Chancellor of the Exchequer George Osborne said:

“I am delighted to be able to announce these appointments to the interim Financial Policy Committee. The skills, expertise and experience they bring are invaluable and I am confident we have the right people to do the job.”

 As previously announced, the other members of the interim FPC are:

There are also two non-voting members:

At the same time, the Government has published more detail on the implementation of its reforms to financial regulation.  A new approach to financial regulation: building a stronger system provides further detail on the Government’s proposals to reform the framework of financial regulation in the UK following the failure of the tripartite system. The document describes the wholly new approach the Government will implement, addressing the fundamental weaknesses of the existing regulatory system. The flaws in this system were demonstrated by the financial crisis that started in 2007, which began with a run on a major high street bank and resulted in part nationalisation of two of the largest banks in the world. This document is available on the Treasury website.

This document expands and further consults on the Government’s proposals, set out last year, to disband the Financial Services Authority and establish a new system of more specialised and focused financial services regulators. The Government’s reforms focus on three key institutional changes:

This corrects the failures of the past by creating regulators with clear objectives and the powers needed to deliver them.

"A new approach to financial regulation: building a stronger system" outlines the Government’s thinking on a range of issues, including:

These reforms will create a stronger regulatory structure which reinforces stability in financial markets and helps deliver better outcomes for consumers.

Following the consultation, the Government will present a further White Paper including a draft Bill for pre-legislative scrutiny in the spring. The Government expects the new regulatory structure to be in place by the end of 2012.

Financial Secretary to the Treasury Mark Hoban said:

“The Government is delivering on its commitment to reform the financial system, to avoid repeating the mistakes of the recent financial crisis and to ensure that taxpayers are protected.

“Today’s announcements are a crucial milestone in implementing the Government’s plans for fundamental reform of financial regulation. To take this forward, we welcome the input of everyone who has an interest, especially regulated firms, to ensure that we get the design right.”

Notes for editors

1. The Government intends to introduce legislation to create the new regulatory authorities in the current Parliamentary session, and expects passage of primary legislation to be completed by the end of 2012. The FSA will retain its current responsibilities throughout the transition period. The FSA will move to a new management structure for conduct and prudential regulation on 4 April 2011.

2. The Programme for Government set out the following action on financial regulatory reform: “We will reform the regulatory system to avoid a repeat of the financial crisis. We will bring forward proposals to give the Bank of England control of macro-prudential regulation and oversight of micro-prudential regulation.”

3. In his Mansion House speech on 16 June 2010, the Chancellor of the Exchequer, George Osborne, outlined the Government’s plans for reforming the regulatory system, including the creation of an independent Financial Policy Committee at the Bank of England, a new prudential regulator, and a new consumer protection and markets authority.

4. Pre-legislative scrutiny (PLS) means that legislation is published in draft prior to its introduction to Parliament. The Government expects that, in this case, a joint committee of MPs and peers will be formed to scrutinise the draft Bill, although the format and timing of PLS is a matter for Parliament.  The committee will take evidence and will report, with suggested changes to the legislative drafting.

5. The four independent members of the interim FPC were appointed by the Chancellor, in consultation with the Governor, both of whom sought to ensure that each member brings a balance of experience and a sound understanding of the issues at stake. These appointments will be for the duration of the life of the committee (until the permanent committee can be established by law) which is expected to be around 2 years. At this point, external members for the statutory FPC will be appointed in a similar way to the external members of the Monetary Policy Committee, following the usual public appointments process. The Government and Bank hope that the external members of the interim FPC will feel able to continue to offer their knowledge and expertise and aid continuity by applying for the permanent body, once it is established.

6. Brief biographies:

Donald Kohn

Michael Cohrs

Richard Lambert

Alastair Clark

Non-media enquiries should be addressed to the Treasury Correspondence and Enquiry Unit on 020 7270 4558 or by e-mail to public.enquiries@hm-treasury.gov.uk

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