Tories would scrap FSA

Monday 20th July 2009

The Conservative and Liberal Democrat opposition parties have announced how they would reform the UK's banking system.

George Osborne, shadow chancellor of the exchequer, said Tory plans would scrap the Financial Services Authority (FSA) and bring new powers to the Bank of England.

A white paper on financial regulation will be launched by Mr Osborne today, expected to outline the need for a "strong regulator".

The Lib Dems have also had their say on the financial crisis, with Treasury spokesman Vince Cable saying: "The large, failed, British banks are the financial equivalent of Chernobyl."

Speaking on the BBC's Andrew Marr show, Mr Osborne said: "Given everything that has happened, it would be bizarre to stick with a system of regulating the banks that failed so spectacularly."

The white paper – entitled Conservative plan for sound banking - will be outlined later today, expected to give the Bank of England more regulation powers, while also giving responsibility for supervising financial institutions to a new financial policy committee.

Also later today Mr Cable will deliver a speech on reform of banking regulation to the London Stock Exchange. The Lib Dems will be calling for RBS and Lloyds to be broken up, highly paid bankers to publish details of their remuneration, as well as the FSA to remain a unitary regulator.

Mr Cable said: "The government has yet to grapple with the challenge posed by the governor of the Bank of England: that if a bank is too big to fail it is too big. One approach is to make it easier for big institutions to fail.

"Some aspects of the financial services industry are simply too big for the British economy to manage safely. The large, failed, British banks are the financial equivalent of Chernobyl. Like the former Soviet Union, the UK became over reliant on dangerous financial reactors.

"My approach to the City is not one of hostility, or of obsequiousness. I recognise its importance. But it needs 'tough love', not the freedom to run amok."

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