Friday, 16 November 2012

UK: ring-fenced banks and governance - some differences of opinion

The Parliamentary Commission on Banking Standards took oral evidence last week from several people including the Financial Reporting Council chairman Baroness Hogg. An uncorrected transcript of the evidence session was published today: see here. Amongst the matters discussed was the accountability of directors of the ring-fenced bank in the context of the Government's proposed banking structure reforms.

Baroness Hogg referred to the comments of Andy Haldane (an executive director for financial stability at the Bank of England) at an earlier evidence session (see here) with regard to the need for the ring-fenced bank's governance to be separate from the rest of the banking group. She observed: "... I think the notion that a ring-fenced bank could have entirely separate governance is wrong, a mistake .. [it] would create a vacuum of accountability to anyone other than the regulator, and would sever the line of accountability through the parent to the providers of risk capital...". But, as Andy Haldane has often asked, is this existing line of accountability, with the shareholders centre stage, appropriate for banks?

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