Press release

Government announces appointment of external members to the Interim Financial Policy Committee

This news article was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

Government announces appointment of external members to the Interim Financial Policy Committee.

The government and the Bank of England today announced that Alastair Clark, Michael Cohrs, Donald Kohn and Sir Richard Lambert have been appointed to the interim Financial Policy Committee (FPC) as external members.

The interim FPC is being established to prepare the ground, in advance of legislation, for the creation of the FPC as the body responsible for the stability of the financial system as a whole, addressing one of the main flaws of the current regulatory framework. 

Chancellor of the Exchequer George Osborne said:

I am delighted to be able to announce these appointments to the interim Financial Policy Committee. The skills, expertise and experience they bring are invaluable and I am confident we have the right people to do the job.

 As previously announced, the other members of the interim FPC are:

  • the Governor of the Bank of England, Mervyn King, as Chair
  • the Bank of England’s Deputy Governor for Financial Stability, Paul Tucker
  • the Bank of England’s Deputy Governor for Monetary Policy, Charlie Bean
  • the Chief Executive of the FSA, Hector Sants (in his capacity as future Deputy Governor for Prudential Regulation of the Bank of England and Chief Executive of the Prudential Regulation Authority)
  • the Chairman of the FSA, Adair Turner
  • the Bank of England’s Executive Director for Financial Stability, Andy Haldane
  • the Bank of England’s Executive Director for Markets, Paul Fisher

There are also two non-voting members:

  • the Chief-Executive-designate of the Financial Conduct Authority (formerly known as the consumer protection and markets authority), Martin Wheatley
  • a Treasury member

At the same time, the government has published more detail on the implementation of its reforms to financial regulation. A new approach to financial regulation: building a stronger system provides further detail on the government’s proposals to reform the framework of financial regulation in the UK following the failure of the tripartite system. The document describes the wholly new approach the government will implement, addressing the fundamental weaknesses of the existing regulatory system. The flaws in this system were demonstrated by the financial crisis that started in 2007, which began with a run on a major high street bank and resulted in part nationalisation of two of the largest banks in the world. This document is available on the Treasury website.

This document expands and further consults on the government’s proposals, set out last year, to disband the Financial Services Authority and establish a new system of more specialised and focused financial services regulators. The government’s reforms focus on three key institutional changes:

  • the creation of an independent Financial Policy Committee (FPC) in the Bank of England
  • the establishment of a new Prudential Regulation Authority (PRA) as a subsidiary of the Bank
  • the creation of an independent conduct of business regulator, the Financial Conduct Authority (FCA), which was formerly provisionally titled the consumer protection and markets authority

This corrects the failures of the past by creating regulators with clear objectives and the powers needed to deliver them.

A new approach to financial regulation: building a stronger system outlines the government’s thinking on a range of issues, including:

  • the objectives of the new regulatory bodies and the factors which they must consider in fulfilling their objectives
  • the levers and likely tools the FPC will have at its disposal to protect financial stability; the PRA’s judgement-led approach in regulating firms
  • the FCA’s more proactive and focused approach to regulating conduct in financial services and markets
  • accountability measures for the new regulatory bodies
  • coordination mechanisms which will determine how the regulatory authorities will work together, and with regulated firms

These reforms will create a stronger regulatory structure which reinforces stability in financial markets and helps deliver better outcomes for consumers.

Following the consultation, the government will present a further White Paper including a draft Bill for pre-legislative scrutiny in the spring. The government expects the new regulatory structure to be in place by the end of 2012.

Financial Secretary to the Treasury Mark Hoban said:

The government is delivering on its commitment to reform the financial system, to avoid repeating the mistakes of the recent financial crisis and to ensure that taxpayers are protected.

Today’s announcements are a crucial milestone in implementing the government’s plans for fundamental reform of financial regulation. To take this forward, we welcome the input of everyone who has an interest, especially regulated firms, to ensure that we get the design right.

Notes for editors

  1. The government intends to introduce legislation to create the new regulatory authorities in the current Parliamentary session, and expects passage of primary legislation to be completed by the end of 2012. The FSA will retain its current responsibilities throughout the transition period. The FSA will move to a new management structure for conduct and prudential regulation on 4 April 2011.

  2. The Programme for Government set out the following action on financial regulatory reform: “We will reform the regulatory system to avoid a repeat of the financial crisis. We will bring forward proposals to give the Bank of England control of macro-prudential regulation and oversight of micro-prudential regulation.”

  3. In his Mansion House speech on 16 June 2010, the Chancellor of the Exchequer, George Osborne, outlined the government’s plans for reforming the regulatory system, including the creation of an independent Financial Policy Committee at the Bank of England, a new prudential regulator, and a new consumer protection and markets authority.

  4. Pre-legislative scrutiny (PLS) means that legislation is published in draft prior to its introduction to Parliament. The government expects that, in this case, a joint committee of MPs and peers will be formed to scrutinise the draft Bill, although the format and timing of PLS is a matter for Parliament.  The committee will take evidence and will report, with suggested changes to the legislative drafting.

  5. The four independent members of the interim FPC were appointed by the Chancellor, in consultation with the Governor, both of whom sought to ensure that each member brings a balance of experience and a sound understanding of the issues at stake. These appointments will be for the duration of the life of the committee (until the permanent committee can be established by law) which is expected to be around 2 years. At this point, external members for the statutory FPC will be appointed in a similar way to the external members of the Monetary Policy Committee, following the usual public appointments process. The government and Bank hope that the external members of the interim FPC will feel able to continue to offer their knowledge and expertise and aid continuity by applying for the permanent body, once it is established.

  6. Brief biographies:

Donald Kohn

  • As the former vice chairman of the Federal Reserve, Kohn is an expert on monetary policy, financial regulation and macroeconomics. Prior to taking office as a member of the Board of Governors of the Federal Reserve, he was an adviser to the Board for Monetary Policy from 2001 to 2002, secretary of the Federal Open Market Committee from 1987 to 2002, director of the Division of Monetary Affairs from 1987 to 2001, and deputy staff director for Monetary and Financial Policy from 1983 to 87. He also held several positions in the Board’s Division of Research and Statistics: associate director from 1981 to 1983, chief of Capital Markets from 1978 to 1981, and economist from 1975 to 1978.
  • Donald Kohn is a senior fellow in the Economic Studies Program at the Brookings Institution.

Michael Cohrs

  • Michael Cohrs spent 10 years at Goldman Sachs in New York and London from 1981 to 1991.
  • He then worked at S G Warburg in London from 1991 to 1995.
  • He was then a Management Board Member, Co-Head of Corporate and Investment Banking and a Member of the Group Executive Committee at Deutsche Bank. He retired from Deutsche Bank in September 2010.  
  • In 2009 he was appointed Adjunct Professor at Beijing University.   
  • Michael Cohrs was a member of the Presidential Task Force on Market Mechanisms (the “Brady Commission”) which made policy recommendations in the USA after the stock market crash in October 1987.

Richard Lambert

  • Sir Richard Lambert was editor of the Lex Column, New York Bureau Chief, and deputy editor at the Financial Times. He was editor of the paper from 1991 to 2001. From 2003 to 2006 he was on the Monetary Policy Committee of the Bank of England.
  • He was Director General of the CBI from 2006 to 2011.
  • He is a trustee of the British Museum, and Chancellor of the University of Warwick.

Alastair Clark

  • Alastair Clark worked at the Bank of England as Executive Director for financial stability from 1997 to 2003 and then as Adviser to the Governor on financial issues and the City from 2003 to 2007. He left the bank in early 2007 but was asked by the Governor, Mervyn King, to return later in the year to help respond to the worsening financial crisis. 
  • Since mid-2009 he has among other things, been working with HM Treasury as Senior Adviser for financial stability, concerned mainly with the policy response to the financial crisis.
  • He is an honorary visiting professor at the Cass Business School in London and an honorary fellow of the Association of Corporate Treasurers.

Non-media enquiries should be addressed to the Treasury Correspondence and Enquiry Unit on 020 7270 4558 or by e-mail to public.enquiries@hm-treasury.gov.uk

Media enquiries should be addressed to the Treasury Press Office on 020 7270 5238.