A NEW Banking Act planned for the UK could offer benefits for the island, the Guernsey Financial Services Commission has said.

Chancellor Alistair Darling is planning the new legislation for later this year and it is understood the act will strengthen the role of the Financial Services Authority.

The Financial Times reported last week that Mr Darling wanted to give the FSA a new statutory objective of maintaining financial stability, making it partly responsible for a function currently entrusted to the Bank of England.

Mr Darling believes the City watchdog should be responsible not just for regulating individual banks, but for ensuring that the combined impact of their business models is not dangerous to the system.

GFSC director general Nik van Leuven (pictured) said it was difficult to know at this stage what precisely was being proposed.

‘The Bank of England already has responsibilities for financial stability through the tripartite arrangements, so we will have to wait and see whether the balance of responsibility for financial stability between the Bank of England and the FSA is in any way changed,’ he said.

The Bank of England was given responsibility for financial stability in 1997 but the Treasury’s view is that it did not do enough to warn of the build-up of credit before last year’s banking collapse.

The new act would make it easier for the FSA to order a bank to change if it considered it was destabilising the system.