The U.K. government unveiled a shake-up of the country's bank regulatory system that will consolidate power within Bank of England. The Financial Services Authority will be splintered into three new agencies, including a bank-regulating subsidiary inside Bank of England. The changes are more ambitious than expected, after the Conservative Party was forced to forge a coalition government with a smaller party.
In a speech Wednesday night in London, the U.K.'s Treasury chief, George Osborne, trumpeted the long-awaited changes as "a new system of regulation that learns the lessons of the greatest banking crisis in our lifetime."
The proposed overhaul requires approval by Parliament and would be implemented by the end of 2012. In addition to its current responsibility for monetary policy, Bank of England will take charge of preventing systemic risks and of day-to-day supervision of the U.K. financial sector through a newly formed subsidiary, tentatively dubbed the Prudential Regulatory Authority.
The FSA's chief executive, Hector Sants, had announced plans to retire this summer, but Osborne persuaded him to take the helm of the new agency for three years.
Two of the FSA's other duties — consumer protection and law enforcement — will be assumed by new independent entities, including an agency focused on white-collar crime.