The Bank of England will assume broad powers over U.K. financial regulation, including oversight of systemic risk and clearinghouses, under proposals laid out by U.K. Treasury Minister Mark Hoban.
The Bank will establish a policy unit, that will include industry executives, to monitor risks to the financial system, Hoban said in a speech in London today. A new consumer agency would also monitor banking products and credit regulation.
Chancellor of the Exchequer George Osborne said on June 17 he will abolish the old regulator, the Financial Services Authority, and give most of its power to the Bank by 2012, undoing the oversight model set up by Gordon Brown in 1997. The FSA was blamed by politicians for not doing enough to prevent the financial crisis.
“Perhaps the most obvious failing of the U.K. system, however, is the fact that no single institution has the responsibility, authority or powers to monitor the system as a whole,” Hoban said.
Under the plans laid out by Hoban today, the FSA’s other powers would be distributed to a wide range of agencies. Oversight of lenders and insurers would be handed over to a prudential regulator that is a unit of the Bank.
A consumer protection and markets authority will be created to monitor conduct in financial markets, Hoban said. The body will have the power to oversee the sale and marketing of products at investment and retail banks that are also overseen by the new prudential regulator. Some powers of the U.K. antitrust regulator, the Office of Fair Trading, might also be transferred to the consumer agency.
“The CPMA’s primary objective in regulation will be to ensure confidence in financial markets,” Hoban said. “In pursuing this objective it will focus on the twin aspects of consumer protection and market integrity.”
The Bank will also take responsibility for overseeing central counterparty clearinghouses and settlement systems, Hoban said, sitting alongside its existing responsibilities for overseeing payment systems.