Bank of England to take over FSA
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The Financial Services Authority is set to become a subsidiary of the Bank of England, BBC business editor Robert Peston claims.
Despite the Conservatives’ pre-election claim that they would “abolish the FSA” it had been widely believed plans had been shelved after coalition talks.
But Peston says Osborne is planning a major overhaul of banking regulation by putting the FSA’s supervisory role over banks, insurers and others on excessive risks under the control of the central bank.
The BBC reporter expects an announcement to be made at the chancellor’s first speech at Mansion House on Wednesday.
The regulator is expected to retain its own board but will be “owned” by the Bank which would reverse one of Gordon Brown’s first acts as chancellor in 1997.
But Peston adds that it is not a full abolition, he says: “My impression is that Mr Osborne is trying to preserve a semblance of independence for the FSA by putting its financial regulatory activities into a legally separate subsidiary of the Bank of England, rather than into just another operating division of the Bank.”
He also understands that within the Bank of England, a new Financial Policy Committee would also be created with the key brief to avoid financial crashes.
It will consist of Bank executives with a direct responsibility for financial stability and senior representatives from the FSA.
One specific aim would be to evaluate the stability of big banks taking over big banks so as to prevent the damaging RBS takeover of ABN Amro in 2007.
Osborne has long been critical of the tripartite regulatory regime of FSA, Treasury and Bank of England as he believes there is no ultimate accountability.
But now, Peston claims, Osborne’s proposed reforms will leave ultimate accountability very much with the Bank of England.
