UK: the abolition of the FSA and the new financial regulation framework

Last night the Chancellor of the Exchequer, the Rt Hon George Osborne, delivered his first Mansion House speech - see here - and outlined, in general terms, significant changes to the structure of financial regulation in the UK. The Financial Services Authority will be abolished in its current form and a new prudential regulator, a subsidiary of the Bank of England, will be created.

Other changes are outlined in the following extract from the Chancellor's speech (further information will be provided in Parliament later today by the Financial Secretary to the Treasury, Mark Hoban MP):

... the Government will abolish the tripartite regime, and the Financial Services Authority will cease to exist in its current form. We will create a new prudential regulator, which will operate as a subsidiary of the Bank of England. It will carry out the prudential regulation of financial firms, including banks, investment banks, building societies and insurance companies.

We will create an independent Financial Policy Committee at the Bank, which will have the tools and the responsibility to look across the economy at the macro issues that may threaten economic and financial stability and take effective action in response. We will also establish a powerful new Consumer Protection and Markets Authority. It will regulate the conduct of every authorised financial firm providing services to consumers. It will also be responsible for ensuring the good conduct of business in the UK’s retail and wholesale financial services, in order to preserve our reputation for transparency and efficiency as well as our position as one of the world’s leading global financial centres.

I can also confirm that we will fulfil the commitment in the coalition agreement to create a single agency to take on the work of tackling serious economic crime that is currently dispersed across a number of Government departments and agencies. We take white collar crime as seriously as other crime and we are determined to simplify the confusing and overlapping responsibilities in this area in order to improve detection and enforcement.

I have thought longer and harder and spoken to more people about all these issues than almost any other issue to have crossed my desk. We do not undertake these reforms lightly, and we do so only because we believe they are absolutely necessary. We will handle the transition carefully, consult widely and get this right. The process will be completed in 2012".