Selected highlights from UK chancellor George Osborne’s Mansion House speech:
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.
It will carry out the prudential regulation of financial firms, including banks, investment banks, building societies and insurance companies.
We will create an independent Financial Policy Committee at the Bank, which will have the tools and the responsibility to look across the economy at the macro issues that may threaten economic and financial stability and take effective action in response.
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.
It will also be responsible for ensuring the good conduct of business in the UK’s retail and wholesale financial services, in order to preserve our reputation for transparency and efficiency as well as our position as one of the world’s leading global financial centres.
I can also confirm that we will fulfil the commitment in the coalition agreement to create a single agency to take on the work of tackling serious economic crime that is currently dispersed across a number of Government departments and agencies.
We take white collar crime as seriously as other crime and we are determined to simplify the confusing and overlapping responsibilities in this area in order to improve detection and enforcement.
Second, withering criticism of the FSA:
The FSA became a narrow regulator, almost entirely focussed on rules based regulation.
No-one was controlling levels of debt, and when the crunch came no one knew who was in charge.
Some lessons have been learnt and some changes made, and I commend those who have led this process.
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.
Ouch, ouch, ouch.
Third, the bank levy:
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.
Finally, an independent banking commission (but no mention of a Volcker rule):
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.
The Commission will come to a view. And the Government will decide on the right course of action.
Sir John Vickers has agreed to chair the Commission.
As a former Chief Economist at the Bank of England, member of the MPC and Chair of the Office of Fair Trading, I believe he is someone of unquestioned ability, experience and integrity who approaches this issue with an open mind.
He will be supported by four other commissioners, Martin Taylor, Claire Spottiswoode, Martin Wolf and Bill Winters.
The Government looks forward to receiving their report next year.