Britain's Queen Quizzes Central Bank on Financial Crisis
Assistant News Editor, CNBC.com
During a visit to the Bank of England on Thursday, the Queen was overheard asking whether a "lax" attitude to financial regulation had contributed to the financial crisis.
After touring the vast vaults of gold bullion that lie beneath the central bank in London, Queen Elizabeth reportedly asked the central bank officials whether the Financial Services Authority (FSA) that was meant to regulate the banking system had not been aggressive enough - "did not have the teeth" - in its response to the crisis.
The committee member, Sujit Kapadia, who was on the tour with a number of officials, told the Queen, according to the BBC, that the crisis had been hard to prevent because the economy was seemingly stable and there was growing complacency.
"People thought markets were efficient, people thought regulation wasn't necessary. Because the economy was stable there was this growing complacency,"he told the Queen, adding that "people didn't realize just how interconnected the system had become."
The Queen was seen to grimace at this and then asked whether there had been a "lax" attitude to financial regulation, stating, "I suppose, in money terms, it is very difficult to foresee. But people had got a bit lax, had they?"
She then questioned whether the FSA may not have been aggressive enough in its policing.She said: "The Financial Services – what do they call themselves, the regulators – Authority, which was really quite new … it didn't have any teeth."
The Queen was then told that officials in the room were charged with ensuring the crisis did not happen again. The Queen's husband, Prince Philip, then jokingly asked "There's not another one coming, is there?" before telling the officials present "Don't do it again."
The FSA responded to the Queen's comments by releasing a statement saying that the regulatory approach had been "flawed" before 2008 and had completely changed since then.
The FSA is to be split into two separate agencies next year and banking regulation will be taken over by the newly created Prudential Regulation Authority (PRA). Interestingly,it is the Queen who will give Royal Assent to the British parliament's Financial Service Bill that will determine the powers for the new regulator.
It's not the first time that the 86-year-old monarch has shown an interest in financial affairs. Four years ago, the Queen asked academics at the London School of Economics, "Why did nobody notice it?"