–Adds Detail To Version Transmitted At 1031 GMT

LONDON (MNI) – The Bank of England’s Monetary Policy, and
Financial Policy, Committees should be the key decision making bodies at
the BOE and the central bank should not rely on a “God like” figure at
the top, leading UK regulator Adair Turner says.

In a Bloomberg TV interview Turner, the chairman of the Financial
Services Authority and a member of the BOE’s Financial Policy Committee,
argued in favour of a transparent BOE with decentralized decision
making. Turner is one of the favourites to take over from BOE Governor
Mervyn King next year, but in the TV interview he declined to comment on
candidates for the governorship.

Turner sketched out his thoughts on how the BOE should evolve. The
BOE is set to assume a raft of new powers next year, making it
responsible not just for monetary policy but also macro-prudential
policy and for financial sector regulation.

Turner, when asked about which individuals were suitable to be the
next BOE Governor, said there were “a hell of lot of other important
things apart from that.”

“I think the checks and balances are very important. The checks and
balances have worked very well in relation to the Monetary Policy
Committee and I think they are increasingly working well in relation to
the Financial Policy Committee,” he said.

“I think we ought to see a lot of the decisions that will need to
be made as coming from those committees, and subject to the process of
challenging within them, rather than depending on some sort of God like,
wise leader, whoever you might think that leader might be,” Turner said.

He was asked about the joint Treasury/BOE initiative to ease credit
conditions, by providing cheap funding for banks, with the FSA working
to ensure banks don’t hold the funding in liquidity buffers. Analysts
have questioned whether the funding plans will prove ineffective because
of weak credit demand.

Turner said in a deleveraging cycle that it can feel like all
fiscal and monetary and macro-prudential policy tools are impotent and
more creative thinking is required.

He said no-one knows whether lending is being constrained by weak
supply or weak demand but what the UK authorities can do is take away
the supply constraints and if the demand turns out to be there then it
will stimulate the economy.

Turner said monetary policy has not “completely run out of steam”
and “if we combine more QE with Funding for Lending with a relaxation of
liquidity requirements I think we will probably get a stimulus through
the monetary side.”

In an audience Q and A after his speech at Bloomberg, Turner said
the Eurozone cannot hang around on the formation of a banking union and
it must allow federal funding to recapitalise banks.

“We have got to cut the fatal loop between sovereigns and banks,”
he said.

–London Bureau; Tel: +44207 862 7491; email: drobinson@marketnews.com
wwilkes@marketnews.com

[TOPICS: MFBBU$,M$$BE$]