BANK OF ENGLAND HANDED MORE REGULATION POWERS - The current head the Bank of England, Mervyn King, has new powers which are expected to curb city excesses and to prevent another financial crash. As head of the bank he was in charge of monetary policy, now he has macro-supervision powers as well. He described his new powers in relation to financial stability as 'turning down the music when the dancing gets a little too wild'. Among other regulation changes, chancellor George Osborne is abolishing the Financial Services Authority by 2012 and getting rid of the tripartite system of regulation that Gordon Brown brought in in 1997. Supervision of banks will be carried out by the prudential regulatory authority, which will replace the FSA, and be chaired by Mervyn King.
Justin Urquhart Stewart, of Seven Investment Management in London, says that the new measures can be summed up as: 'The King is dead, long live the King'. He says that the 'tripartite' system - which shared responsibility for regulation between the Bank of England, the FSA and the finance ministry - will be abolished as it did not work. He says the new regulations will be much more focused on consumers as well as giving a clearer picture of banking risks. He says that Britain needs a high level of intelligence in risk monitoring and proper banking supervision. Pointing out that regulators need to be well paid in order to get suitably qualified people, he says that banking activities had been getting very complicated and regulators were just not sure what was going on. 'You need policemen in place otherwise you will get anarchy,' he stated.
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BP DISASTER WILL LEAD TO INCREASED DRIVE FOR GREEN ENERGY SOURCES - BP has said it will put $20 billion into a compensation fund for victims of the Gulf oil spill and will not pay shareholders a dividend this year. Kristian Steenstrup, of research firm Gartner's energy and utilities division, says that there will be fallout from the Gulf oil spill for many years to come and adds that it has already led to an increased drive for alternative energy sources. He says it is clear that fossil fuels are not just a problem for the environment as they are consumed, but also when they are sourced. This will result in increased investment in renewable sources, and more controls in the operation of oil platforms and infrastructure. He also says the Gulf disaster will increase security attention and asks if this mess can occur because of an accident, what could happen is someone purposely planned a spill.
Mr Steenstrup says it will take many cycles of investment before we move away from fossil fuels and predicts that there will be more investment in sources of electrical power and research into transport fuels. He says that deregulation is working very well in Ireland, with firms reacting with innovation rather than just price competition which has happened in other countries. But he cautions that we are not going to wake up one morning and say we are now in the future - the change will be gradual. He says that businesses must look at the way energy is consumed. He says the infrastructure is designed to handle the peak demand. This is impractical, he states, because it is like building a 22-lane freeway because it gets used one or two times a year.
