- Chancellor of the Exchequer Confirms Abolition of Tripartite Regime
- June 28, 2010 | Author: Darren M. Cooper
- Law Firm: Alston & Bird LLP - Washington Office
Yesterday, at a speech in London, the U.K.'s Chancellor of the Exchequer, George Osborne, confirmed that as part of "a new system of regulation," the U.K. government will "abolish the tripartite regime, and the Financial Services Authority will cease to exist in its current form." In its place, a new prudential regulator will be created, operating as a subsidiary of the Bank of England (BOE) to "carry out the prudential regulation of financial firms, including banks, investment banks, building societies and insurance companies." In addition, Chancellor Osborne announced that the U.K. government will create an independent Financial Policy Committee at the BOE with 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," as well as establish a "powerful" new Consumer Protection and Markets Authority to "regulate the conduct of every authorized financial firm providing services to consumers and to "ensure 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." Finally, he said that "that we will fulfill 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." The proposed overhaul requires approval by Parliament and will be "completed by 2012."
The Chancellor noted that the new structure was consistent with "the agreement that forms the basis of this coalition government," wherein "we stated our intention to give the Bank of England control of macro-prudential regulation and oversight of microprudential regulation." BOE Governor Mervyn King "welcom[ed]" the BOE's proposed new responsibilities, stating that "monetary stability and financial stability are two sides of the same coin," and "during the crisis the former was threatened by the failure to secure the latter.” The Chancellor stated that he has "asked Hector Sants to remain at the FSA to oversee the transition and become the first new deputy governor and chief executive of the new prudential regulator" and that Sants "will be supported by Andrew Bailey from the Bank of England as his deputy in the new regulator."
The Chancellor did not provide any insights into the government's proposals for reform of the banking industry itself, beyond noting that they "will introduce a bank levy and demand further restraint on pay and bonuses." He said that "the new Government is establishing an independent commission on the banking industry," to be chaired by Sir John Vickers, that "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's recommendations will inform the government's decision about future legislation.