LONDON - The Conservative Party has pledged to dissolve the UK Financial Services Authority (FSA) and hand its prudential regulatory responsibilities back to the Bank of England if elected next year.
The UK parliamentary opposition says it will abolish the tripartite regulatory system that was created by financial reforms instigated by current prime minister Gordon Brown in his former role as chancellor upon Labour winning the 1997 general election.
The policy white paper, published by Conservative shadow chancellor George Osborne, states: "We will abolish the failed tripartite system and give the Bank of England responsibility for maintaining financial stability. We will give it responsibility for the prudential regulation of all of our banks, building societies and other significant financial institutions, including insurance companies."
The designs would see bulk of the FSA's 2,500 staff - including those responsible for operational risk supervision and regulation - coming under the aegis of the Bank, which would be granted some of the most wide-ranging powers given to any central bank.
Scrapping the FSA and transferring its powers and resources to the Bank would concentrate the role of day-to-day micro-prudential supervisory responsibility and that of macro-prudential supervision of systemic risks to financial stability under one roof, in addition to the Bank's existing monetary and rate-setting responsibilities.
In his June 17 Mansion House speech, Bank governor Mervyn King criticised the current government's plans to give his institution financial stability powers without the necessary supervisory tools to do the job.
Click here to read the policy white paper.