City insiders warn that the Conservative plans to abolish the FSA (Financial Services Authority) are a step too far.

The Conservatives plan to remove the FSA and completely overhaul the regulation of the banks.  Generally, there is much support for allowing the Bank of England to regulate the banks on a macro level, however, concerns have been raised that this additional burden may distract the BoE from its main duty to maintain financial stability in the economy.

Another issue is that the FSA Chairman, Lord Turner, is currently leading the UK in sensitive negotiations in Europe and this sort of change may undermine the FSA’s role.

With the Conservatives still being generally viewed as the ‘Government in waiting’ as it was termed by the Telegraph this week, their plans should be taken seriously.  If the role of FSA were to change, the CeMAP syllabus would certainly need an overhaul.

The FSA has come under much criticism since the onset of the credit crunch as it has been seen to have allowed the banking crisis to come about by possibly missing certain indicators or not regulating the banks tightly enough.  It will certainly be interesting to see how the FSA’s role changes over the next twelve months to two years.

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