George W. Bush, US president, and Gordon Brown, UK prime minister, have agreed to step up co-operation over the crisis in financial markets. They are setting up a joint working group which will develop plans to monitor and regulate the banking system.
At the heart of the proposals, agreed on Wednesday by Hank Paulson, US Treasury secretary, and Alistair Darling, UK chancellor, is the creation of a body made up of senior Treasury and regulatory figures from London and Washington.
Mr Brown and Mr Bush will discuss greater UK-US co-operation in tackling the financial crisis when they meet at a Nato summit in Bucharest this week and a Washington summit next month.
Whitehall officials say the new UK-US working group, whose membership and terms of reference are being finalised, will seek to establish a common approach on how to respond to the crisis before next month’s meetings of the Group of Seven, the International Monetary Fund and the World Bank.
However, officials say that, given the huge role that London and New York play in financial markets, the significance of the new body will go beyond that.
“We have both been seised of the fact that we need to do something to respond to the financial market turbulence, that we need to generate a shared agenda in the run-up to the spring meetings,” said a senior UK Treasury official.
According to UK Treasury officials, the new body will examine the role of the credit ratings agencies in evaluating risk, amid concerns that they did not fully appreciate the exposure of mortgage-based products to a fall in the housing market.
It will also look at what banks and other institutions need to do to improve transparency in the valuation of complex financial products. Above all, the body will also seek to improve day-to-day co-operation between financial regulators in the US and the UK.