Under the new coalition government with the Conservatives and the Liberal Demoncrats it appears that the Financial Services Authority (FSA) is set to survive – for the time being at least.
Before the General Election, there was much talk of scrapping the FSA and the Conservatives intended to replace it with a new consumer protection agency, handing full regulatory power back to the Bank of England (BoE). However, the new Chancellor of the Exchequer George Osborne has had to change tack and instead supervisory powers have been granted to the BoE, although when asked if scrapping the FSA was firmly off the agenda, Mr Osborne would not commit.
The coalition agreement stated:
“The parties agree that the regulatory system needs reform to avoid a repeat of Labour’s financial crisis. We agree to bring forward proposals to give the Bank of England control of macroprudential regulation and oversight of micro-prudential regulation.”
There is however an agreement to set up an independent report to examine how to separate retail banking from investment banking and the results from this commission are due back within the year.
Lansons director of regulatory consulting Richard Hobbs says: “It seems that Vince Cable’s view prevailed over George Osborne’s and the FSA is safe in this Government’s hands. Therefore, the issue is how long this Parliament will last, which I think will be some considerable time.”
“What tends to happen with proposals like this is that if they do not find expression immediately after an election, they tend to die and life moves on. I think it highly unlikely that the proposal would be resurrected if the Tories were to win an outright majority at an election in a few years time. The proposal to break up the FSA was a highly politically motivated attempt to attack Gordon Brown and was part of an election strategy which is now out of the way.”
For many banks and mortgage advisors, this news will be welcomed and those studying for their CeMAP exams are likely to see only minor changes in the syllabus in the next update.
