As the FT reports, the FSA will be abolished and merged into the Bank of England, the UK will introduce a new "bank levy", put pressure on bank compensation, establish a new consumer protection authority, and commission a full-scale inquiry into the banking system. In the words of the Chancellor:
"I can confirm that the Government will abolish the tripartite regime, and the Financial Services Authority will cease to exist in its current form. We will create a new prudential regulator, which will operate as a subsidiary of the Bank of England...
We will also establish a powerful new Consumer Protection and Markets Authority. It will regulate the conduct of every authorised financial firm providing services to consumers...
The FSA became a narrow regulator, almost entirely focussed on rules based regulation...
But despite the changes that have been made, I am still not confident that the fundamental problems of culture and regulatory structure have been confronted. How do we ensure less box-ticking and more exercise of judgement? What are the tools of macroprudential regulation and who should exercise them? Can the macroprudential regulator do their job if they don’t have an intimate knowledge of what is happening in individual firms?
Our thinking is informed by this insight: only independent central banks have the broad macroeconomic understanding, the authority and the knowledge required to make the kind of macro-prudential judgments that are required now and in the future...
Should we restrict or split the activities of banks? Has our banking industry become too concentrated and uncompetitive? Now I know there are some who are frustrated that these questions are even asked. But how can they not be when so many millions of people are paying the price for what went wrong? There are real issues of fairness. And that is why we will introduce a bank levy and demand further restraint on pay and bonuses...
That is why the new Government is establishing an independent commission on the banking industry. It will look at the structure of banking in the UK, the state of competition in the industry and how customers and taxpayers can be sure of the best deal."
