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May 12, 2010

Coalition government leaves FSA’s future unclear

by Gill Montia

Story link: Coalition government leaves FSA’s future unclear

The Financial Services Authority (FSA) faces an uncertain future as it remains unclear whether the Conservative/Liberal Democrat coalition Government will proceed with Tory plans to disband the regulator and transfer its powers to the Bank of England.

Chancellor of the Exchequer, George Osborne, is known to be keen to scrap the existing tripartite system of regulation involving the Bank, FSA and Treasury.

The system was seen as ineffective when the financial crisis hit and the FSA in particular lost credibility for having failed to address the vulnerabilities of Northern Rock’s business plan.

Under pre-election Conservative party plans, financial firms would be answerable to the Bank regarding their balance sheets, with a new watchdog set up to safeguard the interests of consumers.

In the event of a transfer of powers, the cultural differences between the Canary Wharf-based FSA and Threadneedle Street are likely to create issues.

 

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