Angela's still arsey

Entirely predictably, the British Bankers Association has called for an overhaul of the banking regulatory system in the wake of the Northern Rock crisis while attacking Mervyn King. The BBA is acting here as an industry lobbying body so we should not be surprised to find some special pleading, and indeed we find the usual charge of 'you should have done more'.

One can have some sympathy with the claim that the regulatory system needs review: the deposit protection scheme is sub-optimal (although you can bet the BBA will be among the first to scream if the Bank suggests an insurance-based replacement with banks paying premiums based on risk), and the combination of the market abuse directive and the takeover rules may have prevented a Bank-organised takeover of Northern Rock. Still, none of this is entirely the Bank's fault, nor FSA's. Given the rules as currently written, the Bank has done a good job acting as lender of last resort, rather than, say, lender during a mild panic. It hasn't protected the foolish, only the system, as its remit requires. FSA may have had concerns with Northern Rock's originate-and-securitise model but, contrary to much press comment, this wouldn't have seemed an extraordinarily risky strategy six months ago. It would have been inappropriate to intervene much earlier than the Bank did.