Britain unveils post-crisis overhaul of financial regulation
Britain on Wednesday unveiled sweeping changes to its system of financial regulation, abolishing the framework set up by the last government which faced criticism for failures during the economic crisis.
George Osborne, the new Conservative finance minister, said in his first high-profile speech that powers would be handed back to the Bank of England, and regulator the Financial Services Authority (FSA) would be axed.
"What we are proposing is a new system of regulation that learns the lessons of the greatest banking crisis in our lifetime," the chancellor said during the speech in London.
The plans from the coalition government, which came to power in elections last month, were "a new settlement between our banks and the rest of our society," said the minister
"A fairer settlement in which the banks support the people, instead of the people bailing out the banks."
Osborne revealed the shake-up at his first Mansion House speech, an annual address to business leaders that is one of the most high-profile in the finance minister's calendar.
The so-called "tripartite" system -- which shared responsibility for regulation between the Bank of England, the FSA and the finance ministry -- would be ended, said Osborne.
That system was set up by the previous Labour administration.
Powers for financial regulation would be concentrated at the Bank of England to prevent the failures that occurred during the economic crisis, said the minister.
"At the heart of the crisis was a rapid and unsustainable increase in debt that our macro-economic and regulatory system utterly failed to identify let alone prevent," he said.
"When the crunch came, no one knew who was in charge," the minister added.
Osborne said the FSA would be replaced by an authority which would operate as a subsidiary of the Bank of England.
The new prudential regulator would oversee financial firms, including banks and building societies. Two new bodies, one looking at macro-economic issues and the second focused on consumer protection, would also be set up.
The transition to the new set-up would be completed in 2012, said the chancellor.
© 2010 AFP