Financial Services Bill introduced to parliament

19 November 2009 | By Natalie Thomas

The wide-ranging reforms detailed in the bill include new powers for consumers which will allow them to collectively challenge banks in court.

A new consumer finance body to educate the public will also be set up under the bill, as well as a free nationwide money guidance service.

Firms will need to have ‘living wills’ in place to see them through difficult periods in the business, and will need to ensure they can be wound down in future crises without excessive taxpayer support.

There will be tougher rules on pay and bonuses so that the incentive of huge pay packets doesn’t lead to excessive risk taking.

The government also wants to create a body called the Council for Financial Stability, which will bring together chancellor Alistair Darling, governor of the Bank of England Mervyn King, and chairman of the Financial Services Authority Lord Adair Turner.

Under the Bill the FSA is set to become more powerful in line with an explicit remit for ensuring financial stability in the UK.

The regulator will be given more rule-making powers, and will be able to collect data on non-regulated firms such as hedge funds which impact on financial stability.

The FSA will also have more power to take action where firms and individuals are guilty of misconduct.

Alistair Darling, chancellor of the exchequer, says: “In the past too many banks failed to fully understand the risks they took.

“When the crisis hit, far too many firms found themselves short of capital and without any plan for managing through turbulent times.

“The bill we are introducing today is central to the government’s reform agenda that seeks to empower consumers and make sure that, in the future, taxpayers will not be called on to protect banks from the consequences of their actions.”

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