Tuesday, June 21, 2011

UK Financial Policy Committee needs different points of view

In a GFS News article, several academics criticized the composition of the current UK's Financial Policy Committee members and hinted that there is a need for all the useful, relevant information in an appropriate, timely manner as required under the FDR Framework.
The new UK Financial Policy Committee has been criticised for a lack of external representation which could lead it to suffer from group think. 
Four academics have voiced a number of concerns with the regulatory authority including a lack of representatives from the US, while speaking in front of the Parliamentary Treasury Select Committee on Monday. 
... the [interim FPC] will be made up of six members who currently work at the Bank of England, with just four members being brought in as external members. 
"There are not enough external members, and if the interim FPC is an indicator of the line-up we will need, we probably have the wrong externals," Dr Andrew Hilton, director of the Centre for the Study of Financial Innovation, told the TSC.

"We need an American regulator and an American investment banker," he added, commenting that the skillset of the 'outsiders' would not be able to provide a varied enough critique on the build-up of systemic risk. 
The interim FPC has been set up in anticipation of new regulation formally establishing it. 
In its current form it is chaired by Bank of England governor Mervyn King, who is joined by BoE deputy governor for financial stability, Paul Tucker, BoE deputy governor for monetary policy Charlie Bean, future chief executive of the Prudential Regulation Authority Hector Sants, chairman of the FSA Adair Turner, the BoE executive director for financial stability Andy Haldane, and BoE executive director for markets Paul Fisher. 
Joining the committee externally are former adviser to the BoE governor, Alastair Clark, former co-head of corporate and investment banking at Deutsche Bank, Michael Cohrs and former vice chairman of the US Federal Reserve, Donald Kohn. 
... Jane Fuller, a co-director also at the CSFI, added that there should be "at least as many external [representatives] as there are internal". 
"There should be more people from the real world in there helping to spot credit bubbles," she declared. 
... "Regardless of what you think in a perfect world, then the court has to be reengineered and restaffed," Hilton commented, without making reference to specific employees. 
Dr Hilton also showed an interest in the US Office for Financial Research, which will have the power to demand companies supply it data in order to identify emerging systemic risks. 
In a previous post, your humble blogger offered to sit on the FPC.  What makes me uniquely qualified is

  • I would be the only member who was recognized by the mainstream media for talking about the credit bubble in 2007 and putting forth a disclosure solution that would have moderated the impact of its bursting and helped to limit future bubbles.
  • I developed the FDR Framework understanding that with 21st century information technology it was now possible to base the global financial system off of the combination of the philosophy of disclosure and the practice of caveat emptor.

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