Lessons for the UK - BBA

The British Bankers' Association (BBA) has suggested a review of the recently revised money market framework and the move towards principles-based regulation.

It highlighted three issues with the revised monetary framework:

• whether the standing facility and deposit rates are set at an appropriate level. The BBA said it had argued for a much narrower corridor, of 25 or 50 basis points rather than 100 around the base rate;
• eligible collateral, specifically whether certificates of deposit and commercial paper, should be accepted in the weekly and monthly money market operations; and
• the nature of any disclosure requirements applying either to the Bank or the affected issuer. Disclosure, in Northern Rock's case, "had a clear and significant adverse affect on consumer confidence," the BBA said.

The BBA suggested a review of certain elements of the principles-based approach to regulation, which the Financial Services Authority (FSA) is moving towards. These elements were:

• deposit protection arrangements;
• the operation of Bank facilities to the banks;
• the tripartite memorandum of understanding arrangements.

To view the review, click here