THE UK’S handling of the credit crisis came under the microscope in Guernsey yesterday.

During the Commonwealth Parliamentary Association conference, Treasury Select Committee vice-chairman, Conservative MP Michael Fallon (pictured) said that both Gordon Brown and the banks had been driven by a belief in their own publicity until it was far too late in the run-up to the crisis.

‘We have to have banks that we can trust, that our constituents can trust, and can trust each other.

‘It’s a legitimate function of government to make sure that clean water flows,’ said Mr Fallon.

‘Does that mean more regulation? We might need some more, but first and foremost our regulators must do the job we have entrusted to them.’

He added that the banks had been badly run, poorly governed and laxly supervised by their regulators.

The failed Northern Rock was supervised by just three of some 2,500 staff at the Financial Services Authority, he said.

‘At no level did the FSA ensure the banks had sufficient capital, equity, or that they understood the risks.’

Some additional powers have already been identified, such as depositor protection, and others were still to be discussed, such as the level of global regulation.

‘We need to ensure that the policies adopted now to take the country through the recession are long term and equitable,’ said Mr Fallon.