Wednesday, 17th September 2008

UKIP leader Nigel Farage MEP has called for better supervision of financial services in the wake of the international banking crisis.

"It is clear that we need to have some sensible rules to prevent the sort  of excesses that have led to the current turmoil," said Mr Farage, a former City trader.

But he warned against over-reaction by governments. "What we don't need is a blizzard of regulation that will damage the ability of the finance industry to recover from its present difficulties and put itself back on the path of growth.

"There is no doubt that the deregulation of the past two decades has helped to promote unprecedented growth in financial services and provided a massive boost to the global economy. But as the boom continued, the hands-off approach by regulatory authorities became a careless one, with the result that some banks and others took risks that should have sounded alarm bells."

Mr Farage said the difficulties of Northern Rock, the US mortgage giants Freddie Mac and Fannie Mae and the huge insurance company AIG – along with the collapse in the share price of the British bank HBOS which has forced it into merger talks – demonstrated that the primary element of regulation must be to protect savers, borrowers and consumers.

"Banks are answerable to the markets and their shareholders and should be able to look after themselves – or fail if they can't. But it is the responsibility of government to make sure that bank customers, the innocent bystanders in market corrections, do not lose their savings as a result of financial risks taken by others that they do not understand and over which they have no control."

He said one simple measure would be the application of something like the American Glass-Steagall Act, introduced during the great depression of the 1930s, which separated investment banking from retail banking. The act was repealed during the fever of financial deregulation of the 1990s.

"It is vital that we restore public confidence in high street banks," Mr Farage said, "and a good way of doing that is to make a clear distinction between them and the complex financial activities of investment bankers, which can go seriously wrong and produce the sort of crisis we are seeing now.

"We must make sure that the effects of investment bankers' follies do not spread into retail banking, the service we all depend on for our savings, our mortgages and our credit."

It was astonishing, Mr Farage said, that in the midst of the financial crisis the British government seemed to be paying more attention to dissent within the Labour Party than to the problems and anxieties of its citizens.

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