Andrew Bailey named as head of Prudential Regulation Authority

http://www.guardian.co.uk/business/2013/feb/19/bailey-head-bank-regulator

Version 0 of 1.

The Treasury has named veteran Bank of England official Andrew Bailey as head of its new banking regulator, just a month before he must present a plan to help two part-state-owned banks become independent.

Bailey will be a deputy governor of the bank and chief executive of the bank's new Prudential Regulation Authority (PRA) from 1 April.

He is already head of prudential supervision at the Financial Services Authority and was expected to be confirmed in the new job. The FSA will be scrapped at the end of March when the PRA becomes Britain's main banking and insurance supervisor.

The revamp is part of the country's attempts to draw a line under supervisory failures in the runup to the 2007-09 crisis that forced Britain to take a controlling stake in Royal Bank of Scotland and a large minority stake in Lloyds.

"Andrew Bailey has the right skills and experience to lead the Prudential Regulation Authority as it moves into the new era of judgment-led supervision," George Osborne said in a statement.

The bank, which will be led by Mark Carney from July, will become one of the most powerful central banks when it takes on its new prudential supervisory role. It is also home to the new Financial Policy Committee (FPC), on which Bailey sits, to set the direction for supervision.

Bailey's immediate challenge is to present a plan in March to the FPC outlining how much extra capital and restructuring RBS and Lloyds may need to stand on their own two feet. David Cameron said on Tuesday he wanted changes at RBS to be accelerated.

It will be a tricky balancing act for Bailey, as the government will want to make sure the banks can plug any capital gaps themselves and not depend on taxpayers again.

Bailey is looking at whether all the UK banks are properly capitalised, though the focus is largely on RBS and Lloyds.

"His leadership will be instrumental in shaping a much needed cultural change at the regulator, moving away from the failed box-ticking exercises of the FSA towards more judgment-led regulation," said Andrew Tyrie, chairman of parliament's treasury select committee.

"The size of the task facing Mr Bailey should not be underestimated," added Tyrie, whose committee will hold an appointment hearing next month, though with no power of veto.