Lord Stewartby
Main Page: Lord Stewartby (Conservative - Life peer)
Lord Sassoon
We will put in place as soon as possible an interim financial policy committee. Whether we need legislation and what the nature of that legislation is rather critically depends on the institutional arrangements we are going to put in place. That is something we will come back to when I repeat, no doubt, my right honourable friend’s Statement tomorrow.
Lord Stewartby
My Lords, since this subject is going to come before your Lordships’ House on many occasions, no doubt, in the next year or two, could we make sure that there is a degree of rigour in the choice of the terminology? In this Statement, we read about macro-prudential supervision and micro-prudential regulation. Regulation is not the same as supervision, however, and vice versa. Some of the problems in the past few years have been due to the fact that people who should have been regulating were not. They were supervising but were not in a position to do so. We need to get this straight.
I was chairman of the audit committee of an international bank for many years. I never came across micro-prudential regulation because regulation inherently is not a micro subject. It is the framing of rules which the industry must observe and which individual bodies must observe. It is not a detailed operation; that is left for supervision. This confusion contributed to the fact that it was not always done as it should be.
Lord Sassoon
My Lords, I thank my noble friend Lord Stewartby for pointing out one of the critical parts of the construct we will put in place. I apologise for using the new terminology—I hope he will forgive me—but the macro-prudential regulator also needs to have oversight of the micro-prudential regulation, the supervision of individual firms. That is part of what we will come back to tomorrow.