UK scraps FSA, reversing system set up by Brown

Chancellor of the Exchequer George Osborne said he will abolish the Financial Services Authority and give most of its power to the Bank of England, undoing the regulatory system set up by Gordon Brown in 1997. 

In sweeping changes to financial regulation since then, the watchdog will be wound down and replaced by three bodies over the next two years, the chancellor said. A Prudential Regulatory Authority will be created as a subsidiary of the central bank. Osborne will also set up a Financial Policy Committee at the bank and establish a consumer protection and markets agency. 

Osborne, whose Conservative Party took power after the May 6 elections, is delivering on a promise made almost a year ago to shake up the way UK’s banks and markets are policed. He’s blamed the system established by former Labour Prime Minister Brown for failing to prevent a financial crisis that saddled taxpayers with liabilities of as much as $2.1 trillion and plunged the economy into the worst recession since World War II. 

 

“At the heart of the crisis was a rapid and unsustainable increase in debt that our macroeconomic and regulatory system utterly failed to identify let alone prevent,” Osborne said at his first Mansion House dinner in London. 

Brown’s government had to nationalise Northern Rock, the first UK casualty of the credit crunch, in February 2008.