Regulatory rejig could cost £50m, says government

Mark Hoban
MARK HOBAN DELIVERING ON COMMITMENT

The Treasury estimates that it will cost the finance industry £50m to disband the Financial Services Authority and create a new regulatory system.

Mark Hoban, financial secretary to the Treasury, issued a consultation paper last week that sets out detailed proposals for reform of the financial services sector.

The reforms were first announced by chancellor George Osborne on June 16.

Osborne set out plans to overhaul the system of regulation, giving the Bank of England powers over macroprudential regulation via the Financial Policy Committee, to be established in the autumn.

The consultation invites views on this proposal plus plans to create a prudential regulator under the control of the Bank headed by a new deputy governor, the first of whom will be current FSA chief executive Hector Sants. He will be responsible for supervising the soundness of individual firms.

The Treasury says it does not envisage that the proposed reforms will in themselves change the conditions firms must satisfy to obtain authorisation but there may be extra costs in the order of £50m, spread over three years.

The Treasury says it intends to consult on the merits of a transfer of responsibility for consumer credit from the Office of Fair Trading to the new Consumer Protection and Markets Authority.

It also proposes breaking up the present Financial Services Compensation Scheme to eliminate cross-subsidies between business types.

The CPMA will be independent of government and take the form of a limited company financed by the industry.

Hoban says: “The coalition government is delivering on its commitment to reform the financial system so we avoid repeating the mistakes of the recent credit crisis while ensuring that taxpayers are protected.”