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17/06/2010 - FSA Axed

The Financial Services Authority is to be abolished and the Bank of the England given wide-ranging powers to prevent another financial crisis, the chancellor George Osborne announced last night.

The move will make the new enlarged central bank one of the most powerful regulatory bodies in the world, with responsibility for both monetary policy and financial regulation.

The FSA, meanwhile, is to be replaced by a new prudential regulator that will operate as a subsidiary of a beefed-up Bank of England.

From the ashes of the FSA a new ‘Consumer Protection and Markets Authority’ will be created to regulate every firm providing financial services to consumers, the chancellor announced, promising further details today of what will be the biggest shake-up of City regulation in 13 years.

The Bank of England, meanwhile, will be transformed into one of the most powerful regulatory bodies in the world. A new Financial Policy Committee within the bank will be given the power and responsibility to look at the ‘macro issues that may threaten economic and financial stability and take effective action in response.’

The current ‘tripartite agreement’ between the FSA, the Treasury and the central bank had ‘utterly failed’ both before and after the crisis, Osborne said in his first big set-piece speech as Chancellor.

The new system of regulation would rectify these shortcomings, Osborne promised, by bringing together responsibility for micro- and macro-prudential regulation under one roof.

To some surprise it was also announced that Hector Sants, the current chief executive of the FSA, would stay on after the FSA’s demise, to become the new deputy governor and chief executive of the new prudential regulator.

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