Posen; "UK banking sector is destabilised"

Adam Posen

A report on Wednesday by a member of the Bank of England's monetary policy committee has suggested the UK banking sector is suffering from insufficient competition, and as a result is destabilised.

Adam Posen, who joined the monetary policy committee on 1 September 2009, also backed a tougher stance on banking regulation to avoid further crisis, reports the Telegraph.

"I actually think the UK is in some ways ahead of its EU neighbours and even the US in terms of confronting banking problems," Mr Posen was reported to have said at a conference on the euro sponsored by the Federal Reserve Bank of Dallas.

"But systemically this means in the UK right now we have essentially five banks [...] that do all the domestic lending. That’s not a competitive situation, that’s not a stable situation."

Posen's comments come on the back of Hector Sants, the chief executive of the Financial Services Authority (FSA), unveiling the FSA's annual business plan for 2010/2011. Mr. Sants made comments yesterday over the uncertainty of the City regulator’s future, suggesting that this posed the biggest challenge to recruiting the extra staff the FSA needs to carry out its ambitious plans.

The Tories have said in the past that if they win the election they will disband the FSA.

Even so, Mr Sants said that since the Tory plans would require a new Act of Parliament, it was likely that the FSA will stay in its current form for the next 12 months, regardless of which party wins the election.

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