British minister outlines financial regulation shake-up
Britain's new finance minister George Osborne outlined plans Wednesday to hand powers for financial regulation back to the Bank of England (BoE).
Osborne said the current "tripartite" system, set up by the former Labour government and headed by the Financial Services Authority (FSA), had failed "spectacularly" during the global financial crisis.
The Conservative chancellor, in office since elections last month, also named former Bank of England chief economist Sir John Vickers to chair a commission on the future of the banking industry.
"The tripartite system ... failed spectacularly in its mission to ensure stability in the financial markets," he told the House of Commons, referring to the arrangement of the BoE, the FSA and the Treasury.
"The coalition agreement commits us to reform the regulatory system for financial services in order to avoid a repeat of the financial crisis and that is precisely what we will do," he added.
The BoE will be given power to oversee micro-prudential regulation because it needs "to have a deeper understanding of what is going on in individual firms," he said, adding that further details will be unveiled Thursday.
The comments came ahead of Osborne's first Mansion House speech late Wednesday, an annual address to business leaders that is one of the most high-profile in the finance minister's calendar.
Press reports said Osborne was set to announce he would strip the FSA of the role of ensuring the country's financial stability.
While the FSA would continue to supervise individual banks, the body would be answerable to the Bank of England, which would be charged with stopping the build-up of risk in the economy, said the Financial Times.
When in opposition, the new chancellor advocated abolishing the FSA.
But he is reportedly thought to have watered down his proposals as part of the deal to bring his Conservative party into power last month in a coalition government.
The Conservatives came first in the May 6 general elections but failed to win an outright majority in the House of Commons, so were forced to form a coalition with the smaller Liberal Democrat party.
Both parties had to agree to compromise on a series of policies to finalise the deal.
Osborne said the new banking commission would be headed by Vickers, who he said would bring "unquestioned experience, integrity and independence" to the role.
"He approaches this issue with an open mind ... unlike the last government, this government is prepared to confront the difficult challenges of the regulation and structure of the banks," he said.
"We are prepared to learn the lessons of what went wrong, even if they are not."
© 2010 AFP