Darling to hand FSA more power in wake of Rock crisis

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Darling is set to enhance the powers of the Financial Services Authority, which bore the brunt of criticism over the weekend from the powerful Commons Treasury select committee's first report into the Northern Rock affair.

It concluded that the Tripartite Authority - which includes the FSA, Bank of England and Treasury - had failed in its duties over the bank. It specifically accused the FSA of not acting quickly enough and the Bank of England for failing to help the wholesale money markets.

John McFall, chairman of the committee, said: "The FSA appears to have systematically failed in its duties and this failure contributed significantly to the difficulties."

But Darling has made it clear he wants to vest more power in the FSA, allowing it to examine banks' books more closely, continuously check their liquidity and step in rapidly if it fears they are in trouble.

Michael Fallon, the leading Conservative on the committee, said: "The FSA let us down. It has a conflict of interest to carry out a rescue when it also has supervisory powers. They are the wrong people to have more power."

The Treasury select committee also called on the Government to appoint a new deputy governor of the Bank of England with specific responsibility for managing financial crises and advising the Chancellor on such areas.

Darling said last week that he would announce "wide-ranging proposals to strengthen our regulatory and supervisory regime" and would be looking at "early-warning systems."