This formulation mirrors that for the Monetary Policy Committee and should ensure that the FPC approaches its primary objective of ensuring resilience of the financial system in a way that does not unduly impede economic growth. Seven of the members of the Committee, including myself, are drawn from within the financial authorities: the Bank of England and the Financial Services Authority (FSA). 1 The remaining four are external members who bring special expertise and experience and can  1  At present they are: the Governor; the two Deputy Governors; the executive directors for Financial Stability and for Markets; and the Chairman and Chief Executive of the FSA. When the FSA is dissolved into the Prudential Regulation Authority (PRA), which will be part of the Bank, and the Financial Conduct Authority (FCA), these last two will be replaced by the heads of the PRA (who will be a third Deputy Governor of the Bank) and FCA. 2  BIS central bankers’ speeches  reduce the risk of the “group think” that might arise in a committee comprised solely of insiders. There is also a non-voting representative from the Treasury. The powers of the Committee are two-fold. First, the FPC can issue recommendations. These could be general recommendations, for instance to financial institutions or the Treasury. Or they could be specific requests to the prudential or conduct regulators who would then be expected to comply with the recommendation or else explain why not.
Possibly, the number of authorities involved could be reduced somewhat if the mandate is based on an agreement between only the directly involved countries. At this point, it is however not very clear how such a contract could be made legally binding. Although solutions that are adapted to a specific situation are better than no solution at all, I am sceptical as to their practicability in a dynamic world. They have the same basic flaws as the model of home country lead supervision. In a constantly transforming banking landscape, relevant jurisdictions will change when principal ownership is transferred from one nationality to another. That’s why I also don’t believe in so called regional solutions. A third way, and in my opinion the most logical step in the long run, would be to focus some authority on a European level to deal with the relatively limited number of most important cross-border banks. Supervision of these banks would in my opinion benefit from the establishment of a European financial supervisor. Some opponents of this idea have claimed that proximity might then be lost, and a European supervisor wouldn’t receive enough knowledge about the markets where the institution operates. To my mind, this is not a very convincing argument. First, this problem is no less in the home-host model. Second, it is an organisational problem that can be solved. An EU supervisor would certainly employ staff from all EU countries and have local offices in the national financial centres.