July 1997


Sir Andrew Large
Chairman
Securities and Investment Board
Gavrelle House
2-14 Bunhill Row
LONDON   EC1Y 8RA



Thank you for your letter of 29 July enclosing the
SIB's plan to implement the reform of financial
regulation.  This sets out a sound logistical and
organisational basis for Howard Davies to take the
process of transition forward.  

I have been especially impressed by the positive
contribution which has been made from the outset by all
the regulatory bodies.  This spirit of co-operation and
common purpose will stand us in excellent stead as the
plans for the new single regulator are implemented. 
Meanwhile HM Treasury's complementary work on drawing
up the major legislation needed to support the new
structure is proceeding.  As I have already announced,
I intend to publish a draft Bill for consultation next
Summer.

It is of course vital during this period of transition
that there is no decline in the effectiveness of
regulation.  I know that all those concerned are alert
to this danger and determined not to let standards
slip. 

I have noted the statement of aims to be borne in mind
as the new regulator is set up - maintaining confidence
in the financial system, including in relation to
banking supervision, promoting clean and orderly
markets and consumer protection.  As the report makes
clear, in pursuing these aims the regulators will need
to ensure the costs of regulation are proportionate to
the benefits, and maintain a clear distinction between
the needs of wholesale and retail customers.  I am sure
those concerned will be mindful of the fact that the
costs of regulation - including the transition period -
 will fall on the industry.  Regulation will also need
to be carried out in a way which supports rather than
undermines competitive and innovative markets for
financial products.

I am most grateful to you, not merely for your full and
prompt response to my letter of 20 May but also for
your outstanding leadership as Chairman of the SIB over
the last five years.  I know how hard you have worked
to overcome the shortcomings in the system, a tribute
to your dedication and commitment to the cause of
effective regulation.




                                   GORDON BROWN