A book launch to remember

Bank of England types, former Bank types, FSA staff, former FSA types, City economists and financial journalists crowded into the LSE's New Theatre to hear the authors and panellists discuss the book and themes arising from it. Davies summarised the authors' recommendations for tidying up the world's regulatory bodies - a structure of Byzantine complexity neatly summarised in one of their tables.

He also attempted to pre-empt the charge that there was no chance of any such reform taking place by saying that the US Treasury itself had called for reform of the messy US system. Green summarised the equally complex set-up in the EU, where reform such as the ill-starred financial services action plan was beset by the absence of agreed objectives, and divergent motives of producers, users and politicians - which didn't stop Green for calling for much more centralisation.

Among the panellists, John McFall, the chairman of the Treasury Select Committee which has done such a good job of holding leaders of financial services industry and the public sector bodies involved to account, summarised his view of what had gone wrong.

There had been a clear lack of leadership among the public sector bodies - the Bank, Treasury and FSA. McFall raised a laugh by reporting that at one of the committee's meetings he had asked Mervyn King, the governor of the Bank, whether he could say who had been "in charge" during the Northern Rock affair. King had responded by asking: "Could you define that?" McFall then rolled out a list of culprits: non-executive directors of banks, the twisted compensation and bonus systems, the faulty originate-and-distribute model of banking, and the Bank's lack of authority, meaning it is not listened to in the City. That was why the committee had called for a shake-up at both Bank and FSA.

McFall raised the largest cheer of the evening when he complained that the chief executives of major banks had failed dismally to engage in the debate about what had gone wrong and what should be done. If banks are sincere about putting their houses in order, let their chairman and chief executives engage in the debate.

McFall also, however, left the realms of the real world when he called for the International Monetary Fund to lead a reform of banking regulation. Oh dear.

Sir Steve Robson, a non-executive director of the Royal Bank of Scotland and of JP Morgan Cazenove, and formerly a senior Treasury mandarin, commented that the EU's financial services action plan designed to promote the single market in financial services, had actually made things worse and it was better not to try. He then launched an attack on central banks for causing the crisis by having excessively loose monetary policies, leading to asset bubbles. Commentators who were urging central banks to relax monetary policy further would merely stoke up the next bubble and the next financial crisis.

"Better regulation is not the answer," Sir Steve said. People should learn from their mistakes. The Bank of England, at a critical moment, had decided that moral hazard was more important than the interests of depositors. Then he too seemed to take leave of reality: the Bank, he said, should publish a searing self-criticism of its own actions and policies during the Northern Rock crisis such as the FSA had done. Some hope.

"Global Financial Regulation - The Essential Guide" , written by Howard Davies and David Green.

Basil Wiley

ISBN Number: 9780745643496

ISBN10: 0745643493