There are many ways for banking groups to reconfigure their corporate structure. In the end, what counts as a FHC is a matter of substance, and not of the form of the organisation chart. MAS reserves the right to declare any company which owns a substantial share of a bank, directly or indirectly, as an FHC. Such an FHC will be subject to MAS regulation and will not be allowed to own non-financial activities. BIS Review 53/2000  4  Cross-shareholding The financial entities will not be allowed to own, directly or indirectly, the shares of non-financial firms affiliated to the same principal shareholder. Within the financial arm, shareholdings should only be in one direction. We will not allow two companies in the financial arm to have mutual shareholdings in each other. For example, if a bank takes a stake in an insurance company or securities firm, then the insurance company or securities firm would not be allowed to hold a stake in the bank. The Companies Act already prohibits subsidiaries of banks from owning shares in the bank. We will extend this principle to all entities below the bank or FHC, whether or not they are subsidiaries of the bank or FHC. Ideally, we should also disallow the non-financial entities from owning shares in the financial entities. However, we do not start from a clean slate. Requiring the banks to divest themselves of the nonfinancial activities will already be a major structural change.
And although consumer price inflation here is close to target at 2.1%, three developments now threaten to push it significantly above target this year. First, oil prices are around $ a barrel, although they have fallen back in recent days. In August, the price was $ Second, oil price increases have been accompanied by rising gas prices in wholesale markets. And this month we have seen announcements from suppliers of increases in household gas and electricity bills of the order of 15%. Third, world food prices have risen sharply as a result of strong demand growth on the one hand and poor harvests from South Australia to North Carolina on the other. Food prices on world markets are a third higher than they were six months ago, and that has been feeding through to prices in the shops. Food price inflation in our own Consumer Price Index reached almost 6% in December. So 2008 is likely to see higher energy prices, higher food prices and, with a lower exchange rate, higher import prices, pushing inflation above the 2% target. It is possible that inflation could rise to the level at which I would need to write an open letter of explanation, possibly more than one, to the Chancellor. Although there is little we can do now to avoid some rise in inflation this year, the task of the Monetary Policy Committee is to ensure that it is short-lived.