British Chancellor Alistair Darling claims that there are no plans for a fundamental reform of the structure of the system regulating the UK financial institutions as the current system is not to blame for the credit crunch, but rather the bosses running the banks.

He therefore wants to improve the quality of the regulators running the banks.

The current system employs a tripartite system of the Treasury, the Bank of England and Financial Services Authority (FSA). It was introduced when the current Prime Minister, Gordon Brown, was still Chancellor. But it has been widely criticised recently for failing to prevent banks from taking excessive risks.

Mr Darling says that the overall regulation needs to be improved on the current system, but that the main problem that needs to be addressed with the current system is in the board room.
“It needs to be more intrusive and needs to ask harder questions. Too many people did not understand the risks to which they were being exposed. You’ve got to make sure you’ve got the right people there to make the right judgements.”

US Make Changes Of Their Own

On the other hand, the US has recently unveiled huge changes to its financial system to prevent any further financial problems. The changes include new powers being given to the Federal  Reserve to oversee the relationship between financial institutions.

The Federal Reserve will also require financial firms to hold more capital in case of further crises to avoid what happened last year when the investment bank Lehman Brothers collapsed, posing a serious threat to the financial system.

According to Mr Darling, these changes by the US are similar to what the UK did 10 years ago.

He said: “Having stabilised the banking sector, we are faced with the challenge of building a stronger, more efficient and more resilient financial sector in the future. Anyone who thinks we can carry on as if nothing has happened should think again. In every country we are paying a huge price for this crisis. Not just the financial cost but also a profound social and human cost.

“I strongly believe that the process of learning lessons has to start in the boardroom, bank boards must have the right people, skills and experience to manage themselves effectively… their focus must be long-term wealth creation, not short-term profits.”

He also suggested that the planned paper on reforming the banking industry that is due to be released in a fortnight, will be much less forceful than was originally planned.

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