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Almost everyone agrees about one important reason for UK officialdom's disorganised response to the banking crisis of late 2007 and 2008. This was that responsibility was shared between three agencies: the Treasury, the Bank of England and the Financial Services Authority, collectively called "the Tripartite authorities". As the nature and extent of each agency's role had not been defined clearly in the relevant legislation, key officials were unsure what they were supposed to do and who was expected to take orders from whom.

One meeting of the House of Commons Treasury Committee has become notorious. When questioned about who was in charge of the Tripartite authorities in the Northern Rock rescue, Mervyn King, Governor of the Bank of England, asked: "What do you mean by ‘in charge'? Would you like to define that?" At a later session Alistair Darling said that "ultimately" accountability lay with him as Chancellor of the Exchequer. (Nevertheless, in mid-2007 the Treasury had hardly any officials with meaningful banking experience.)

Any sensible reform package ought therefore to clarify chains of command and lines of responsibility. But that is not what has happened. By general consent, New Labour made a foolish decision in 1997 when it took banking supervision away from the Bank of England, and transferred it to the newly created and untried FSA. The result was that the organisation with a balance sheet and financial resources, namely the Bank of England, did not have the information and expertise to understand particular banks' problems, which lay with the FSA. 

The coalition government has therefore sensibly decided to give back to the Bank of England its old job of being the UK's main banking regulator. However, a clutter of extra institutions and committees is being proposed, in contrast to the relative simplicity of the pre-1997 situation when the Bank's senior management had considerable discretion. The Bank already houses a Monetary Policy Committee to set interest rates and direct asset purchase programmes. Advanced stage plans now reveal that the Bank is also to host a Financial Policy Committee to oversee so-called "macro-prudential regulation" and to establish a subsidiary, the Prudential Regulation Authority, to take over "micro-prudential regulation". 

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