A new report expresses concerns over the government’s proposed timetable for changes to the
UK’s banking regulation system, which would see the Financial Services Authority (FSA) effectively
scrapped by next year.
The report, from the House of Commons Treasury Select Committee, claims that the planned
overhaul of how banks are supervised may need to be delayed to take into account changes to the
structure of banks.
Under the previous Labour government, responsibility for the regulation of UK banks was split
between the FSA, the Bank of England and the Treasury. Other parties argued that this ‘tripartite’
system contributed to the severity of the financial crisis – with current Chancellor George Osborne
claiming that “no one was controlling levels of debt, and when the crunch came no one knew who
was in charge”.
Under the new system, the FSA would be scrapped, with new regulatory powers split between the
Bank of England and a new Consumer Protection and Markets Authority (CPMA). The coalition
government had planned for the new structure to be in place by 2012.
However, the Treasury Committee’s chairman Andrew Tyrie has said: “In light of the banking
crisis, the government is rightly proposing radical changes to the way in which financial services are
regulated. However, having examined the initial proposals, the committee’s overriding concern is
about the proposed speed of implementation. It is vital to maintain the momentum for reform, but
there is no point in flawed change.”
The report states that the proposed regulatory reform must also take into account separate work
being carried out by the Independent Commission on Banking (ICB), which is tasked with looking at
the structure and practices of banks to find ways of preventing a recurrence of the financial crisis of
recent years.
A statement from the Treasury Committee said, “The report recommends that the government pay
full regard to the ICB before coming to conclusions on financial regulation. This also has implications
for the timetable set out.”
