Large opposes watchdog reform

Sir Andrew Large, chairman of the Securities and Investments Board, has hit back at other City regulators who have been backing a radical reform of the financial policing system.

It emerged yesterday that Sir Andrew has dismissed proposals for change backed by the chief executives of the Securities and Futures Authority and the Personal Investment Authority, calling the ideas they favour "disruptive and time-consuming".

Richard Farrant, chief executive of the Securities and Futures Authority, and Colette Bowe, his counterpart at the Personal Investment Authority, have both publicly supported a shake-up in which regulation is split along functional lines between a body responsible for the health of financial institutions and a second organisation devoted to financial consumer protection.

One version of the reforms, put forward by Michael Taylor, an academic and a former employee of the Bank of England, has become known as the "Twin Peaks" system, with two specialist regulators reporting separately to the Government.

After deliberately keeping a low profile in the argument until recently, Sir Andrew said in a speech in Rome at the weekend that he was sceptical about a switch to a functional system, because there would be no guarantee that it would be better than the existing one.

He did not dispute it would work but said: "There is a guarantee that it will be extremely disruptive and time-consuming to practitioners and public alike in getting there."

Sir Andrew, who is expected to have his contract at SIB renewed shortly, said evolution was far cheaper than revolution. SIB was working hard to improve co-ordination between the various regulatory bodies under its control, as an alternative to switching to a functional system.

Sir Andrew believes a neat division between wholesale and retail regulation is not possible because so many firms are involved in both.

His comments echo remarks recently by Howard Davies, deputy governor of the Bank of England, who said that while there was scope for consolidation among the regulators a substantial change would be too disruptive to be worthwhile.

There have also been hints from Labour that it could take several years for its own proposed regulatory reforms to reach the statute book.

One source said the debate has become highly polarised and was causing a split between senior regulators and their own staff.

Under Labour Party plans junior regulators would be rolled up into the SIB so their chief executives would lose their independent roles, a threat which has provoked the rash of counter-proposals, which would involve dismantling and rebuilding the system.