SIB reforms 'will take years'

The reform of City regulation announced last month by Gordon Brown may take up to three years to implement, Treasury minister Helen Liddell admitted yesterday. In her first speech on the proposed changes to financial supervision she warned that reform would be "long and complex" and said the planned integration of the current front-line regulators into a new super-SIB might not happen until early 2000.

Setting out a timetable for the Government's planned revamp, she told a City audience that the first step in the process - the Bank of England bill that will shift banking supervision to an enhanced SIB (Securities and Investments Board) - would be put before Parliament after the summer recess. That bill, which will also reform the structure of the Bank's governing Court and set up the new monetary policy committee tasked with setting interest rates, is expected to receive Royal Assent at the beginning of 1998.

Mrs Liddell pulled no punches in her assessment of the current state of regulation, which she said was "not delivering the standard of supervision and investor protection that we all have a right to expect." She added: "Accountability is poor. Investors cannot help but be confused by the sheer complexity of the system. Reform is long overdue to simplify the delivery of financial service regulation."

She restated her recent strong-worded attack on the personal pensions mis-selling scandal, describing as "completely unacceptable" the industry's failure to compensate more than a small proportion of those people who had been wrongly persuaded to leave company pension schemes.

"Pension mis-selling is a blight on the integrity of the whole sector. It ill-becomes a world-class industry and it must be put right beyond peradventure as a matter of urgency."

According to Mrs Liddell, much of the impetus for change in financial services would have to come from its own practitioners. She threatened: "If the industry ignores this opportunity to help shape the new regulatory regime, then they will have no one else to blame but themselves. Together we have the opportunity to put in place the sort of regulation that will meet the industry and consumers' needs."

The City was also called on to play its part in the success of an enlarged SIB by putting forward its "smartest and strongest" managers for secondment to the regulator, a practice which Mrs Liddell said was routine in the US. In what was seen as a thinly veiled reference to the collapse of Barings last year, she said the key to effective regulation was the attitude of management.

She said: "Management needs to know its business, to understand the risks to which it is exposed. Unfortunately performance in this area sometimes falls short."