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Sants warns over new BoE governor role and European banking plans

Outgoing FSA chief executive Hector Sants warns the responsibility of the governor of the Bank of England in the new regulatory set up could be too much for one individual.

In 2013, the successor to current BoE Governor Mervyn King will be tasked with heading up the regulation and supervision of banks and big financial institutions.

Giving an interview to the BBC’s business editor Robert Peston, Sants (pictured) warns the role could be too much for one person given the size of the task.

Sants says: “We could be concerned that the operational task given to the governor, as an individual, is just too great. I think the risk is that operationally this is going to be too difficult for just one person to manage.”

Until announcing he was to quit the regulator earlier this year, Sants was due to head up the new Prudential Regulation Authority which will sit within the Bank of England. The Treasury select committe has raised a number of concerns about governance and accountability issues given the new powers the bank will be taking on.

Sants also warns of the dangers of the UK sitting outside the banking union proposed by the European Commission. Chancellor George Osborne has indictated that the UK is unlikely to want to be part of the type of banking union proposed this week by EC president Jose Manuel Barroso.

He says: “If you move to an environment where the majority of the countries were inside the eurozone and therefore had a somewhat different agenda in respect to the rulebook, that would become an unworkable model where we would become dependent on a rulebook that we had effectively no control over.”

Sants suggests the Government and the BoE could have avoided a run on Northern Rock if they had taken up his idea to provide a loan to Lloyds to buy the bank.

Sants says: “I think things would have been different if the Government and Bank had taken my recommendation that they should provide liquidity support to Lloyds to purchase Northern Rock

“I think that would have made a difference. It would have avoided the queues at Northern Rock and it would have changed the general climate in relation to the old building society sector that had moved into the banking sector.”

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  • bobby 15th June 2012 at 4:24 pm

    How has this bloke got the brass neck to be in charge of anything other than an ice cream van ?

  • Mike 13th June 2012 at 4:06 pm

    Glen McKeown @3.26
    Spot on! Unfortunately no-one with any authority or interest in financial services read these columns, otherwise we wouldn’t have these idiots in power.

  • Glen McKeown 13th June 2012 at 3:26 pm

    I’ll ignore the irony in Mr Sants’ comments on too much responsibility for one man, since he is obviously knowledgable on that point.
    The more interesting point regards the collapse of Northern Rock. It is generally accepted that the NR business strategy was very high risk, and depended on the ready recycling of money in the capital markets, which, of course, dried up in 2007.
    So, if I am reading Mr Sants correctly, he wanted to disguise a high risk business strategy by underpinning it with money from the UK Citizen, and also dump a portion of the risk onto Lloyds. Given the subsequent behaviour of Lloyds in accepting HBOS that latter objective was obviously a reasonable, if arguably immoral, proposition. It doesn’t show much compassion for shareholders – but then neither did the Lloyds Board.
    But in doing so, Mr Sants would have been sheltering the Board of NR from the folly of their own business strategy. So here we have a clear statement of his philosophy – power without responsibility. And the public would have been exposed to the cost of that strategy via the Government loan.
    Not taking responsibility for one’s actions appears to be a consistent theme running through Mr Sants recent business life (others may wish to comment on pre-FSA career).
    Certainly no individual has carried any responsibility for the numerous high level and high cost failings of the FSA.
    The current FSCS strategy is again based on neither provider, adviser or consumer carrying responsibility for poor decisions made. There are always other fools who can carry that monetary can. Fine the innocent not the guilty.
    The FSA may impose, but will not carry any responsibility for the costs and administrative mess, of RDR.
    The fact that Mr Sants can still bring up a strategy on the rescue of NR that is morally questionable highlights a personality that is extremely comfortable in its own intellectual world, notwithstanding that it has few points of contact with reality. And he also appears to be intimating that his strategy would have avoided the subsequent financial collapse in the US. Delusional?
    Should this person be in charge of anything – other than crayons?

  • Give me a break! 13th June 2012 at 11:15 am

    I do think he has a point….there are only so many lunches and dinners one can eat…oh, and the odd presentation/pointless speech, which of course dear Hector is a real expert.

  • Jon T 13th June 2012 at 11:02 am

    “We could be concerned that the operational task given to the governor, as an individual, is just too great. I think the risk is that operationally this is going to be too difficult for just one person to manage.”

    Oh, and who, I wonder, would be gracious enough to take up the slack for our poor, overworked Governor? Answers on a postcard please.

    Sounds like more cynical empire building for our beloved Mr Sants, if you ask me!

  • Mike 13th June 2012 at 10:16 am

    That’s rich from Sants. He is pointing out the folly of staying outside the Eurozone banking regulations yet presses on with RDR and the catestrophic effect that will / is having on the UK financial sector and doing this outside of EU recommendations. Double Standards indeed!