War of independence

24 June 2009 By Hugo Dixon Follow @hugodixon

Both the Bank of England and the Financial services authority want more power to fight future bubbles. But neither covered itself in glory fighting the last one. The new regime should include independent voices.

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The UK government is backing the Financial Services Authority in its wrangle with the Bank of England over which institution should have more power in ensuring financial stability, Breakingviews.com has learnt.

The government is due to publish a White Paper setting out its views in the next two weeks, Lord Myners, the City minister, told a conference on Wednesday organised by Business for New Europe.

Lord Turner, the FSA's chairman, called for the creation of a joint BoE/FSA financial stability committee to prevent future bubbles. Turner said such a committee should be modelled on the BoE's monetary policy committee. It should be chaired by Mervyn King, the BoE's governor, and contain nine members, four from the FSA.

Turner also said the FSA would react badly if the BoE merely issued it with edicts. He also said such an arrangement could leave the Bank with power without responsibility and the FSA with responsibility without power.

Turner's suggestion, in evidence to the House of Commons Treasury Select Committee on Tuesday, appeared to be at variance with the view articulated last week by Mervyn King, the BoE's governor, that the BoE should be given more power.

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