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Friday 02nd of October 2009
July 8, 2009    

Chancellor unveils ‘Council of Stability’ to rebuild financial system

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by Kay Murchie
”Chancellor

The Chancellor Alistair Darling has today announced key reforms of banking regulation in a bid to prevent future meltdowns.

The worst financial crisis since the Great Depression of the 1930s has forced the Government to nationalise Northern Rock and Bradford & Bingley, as well as bailing out Lloyds TSB and Royal Bank of Scotland using billions of pounds of taxpayers money.

In response, a new super-regulator, the Council of Financial Stability, has been established which comprises the Financial Services Authority (FSA), the Bank of England and the Treasury.

The Council will oversee banks, closely monitor bonuses and punish misconduct as it attempts to prevent further collapse of the financial system.

There will be more help for consumers which will include a national money advice line funded by the banks.

Health warnings may also be introduced on some financial products (such as mortgages and pension) - similar to those used on cigarettes and alcohol. The aim is to show consumers how risky the products are.

Meanwhile, steps will also be taken to boost competition in retail banking, which will see the FSA and the Office of Fair Trading ensure that new players can enter the market.

The reforms have been welcomed by many, including the British Bankers’ Association who said it would work with authorities to ensure the “long-term success of the UK economy and the banking sector”.

The consumer group, Which?, also welcomed the measures and commended the Government for warning consumers about risky products and increasing protection for bank customers.

However, the White Paper met with criticism by Shadow Chancellor, George Osborne, who said: “This White Paper ducks every difficult questions that needs to be addressed. It is more of a white flag than white paper.”

The long-awaited White Paper comes as Prime Minister Gordon Brown and the Chancellor have been promising a major overhaul of the financial system for some time now.

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