---

Reforming Financial Markets

I have had many discussions with the Governor of the Bank over the past couple of years about these things, and I will have many discussions with him in advance of the preparation of the White Paper. In particular, I have talked to him about the role of the Bank. If we further develop the powers that may be necessary to lean against credit cycles, I have made it clear that the Bank of England is the obvious place to go. However, the point that I was making is that currently the power to increase or reduce capital requirements, which is the most obvious brake one could put on financial institutions, lies with the FSA. I do not want to end up with a situation in which banks do not know whether the FSA governs their capital requirements, or the Bank of England does. The Bank does not want to regulate individual banking institutions and so on. People can hold different view about that, but I want to make sure there is a clear delineation of who is responsible for what, so that we can better hold people to account for what they do.