RTTNews - U.K's conservative government would abolish the Financial Services Authority and would hand banking regulation back to the Bank of England if the party comes into power next year, party leader David Cameron said Monday.
He said in London that the British banking system needs deep and wide-ranging reform that matches both the magnitude of the crisis and the scale of the hardship inflicted on the public.
This crisis has shown we need one body to be unambiguously in charge - always on top of things. In the United States, they've called on the Federal Reserve. In Britain, it's time to call on the Bank of England, the Opposition Party leader said.
So we will abolish the tripartite system and give the Bank of England an explicit role in macro-prudential, system-wide regulation.
Various opinion polls suggest the victory of the Conservatives in next year's election. They were managed to gain consistent lead over the ruling Labor Party in opinion polls.
In its White Paper published today, the Conservatives said it would create a Financial Policy Committee within the Bank, working alongside the Monetary Policy Committee, to monitor systemic risks, operate new macro-prudential regulatory tools and to execute the special resolution regime for failing banks.
The Financial Policy Committee will include independent members in order to bring external expertise to bear on the problem of maintaining financial stability. It will include the Governor and the existing Deputy Governor for Financial Stability, who also sit on the Monetary Policy Committee to ensure close coordination between monetary and financial policy.
Moreover, the Conservatives pledged to make the BoE responsible for macro and micro prudential regulation of all banks, building societies and other significant institutions, including insurance companies.
The proposals are in contrast to Prime Minister Gordon Brown's government's plan to make use of the current tripartite system- the FSA, the Bank of England and the Treasury. Treasury minister Lord Myners reportedly said the Conservative plans may cause considerable disruption.
Stressing the need for abolishing the FSA, Shadow Chancellor of the Exchequer George Osborne said the Conservative plan for sound banking is an essential component of a sustained economic recovery.
Osborne said strains in the banking system, seen in the last two years, are the results of separating the central bank from financial supervision. He criticized Brown for not recognizing the mistake his government has done.
The Conservatives also plan to set up a Consumer Protection Agency, a single powerful body able to stand up for consumers and to ensure that they are treated fairly, once the BoE is in charge of prudential regulation.
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