Concern over future of regulation as Osborne calls time on the FSA
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The mortgage industry has given government plans to scrap the Financial Services Authority a lukewarm reception.
Last week chancellor George Osborne revealed that he plans to abolish the FSA by 2012.
Speaking at London’s Mansion House Osborne declared the end of the tripartite system of regulation.
The Bank of England will control macroprudential policy through its newly-created Financial Policy Committee and govern microprudential regulation via a subsidiary.
But Hector Sants, chief executive of the FSA, is to be appointed first deputy governor of the Bank and chief executive of the prudential regulator.
The government is also setting up the Consumer Protection and Markets Authority. This will regulate the customer services of financial firms.
Andrew Montlake, director at Coreco Group, says the plans could add confusion to the market.
He says: “The devil will be in the detail. On the face of it, it makes sense to put the Bank in charge but the government has created a number of subsidiaries which could confuse matters.
“It would have made more sense to put the Bank in overall control.”
Montlake says no regulator in the world spotted the credit crunch coming so the coalition could be being unduly harsh on the FSA.
Angela Knight, chief executive of the British Bankers’ Association, says the Bank will have power over interest rates and could also stop housing bubbles.
She says: “The Bank will have to keep its eye on the ball of good supervision.
“There are still questions about the new arrangement that need to be resolved, such as the relationship between the Monetary Policy Committee and the FPC, and how the latter will be held accountable for its actions.”
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