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The City faced a major shake-up in banking regulation today as the Tories and Liberal Democrats unveiled plans for reform.
David Cameron said he would scrap the Financial Services Authority, ending the system of control brought in by Gordon Brown more than a decade ago.
He called it a “policy failure of historic proportions” and promised to hand most of its powers to the Bank of England.
“Those bad debts, those risky loans, the soaring house prices, the systemic risk, the asset price bubble — they all fell between the cracks of the system,” said Mr Cameron.
Shadow chancellor George Osborne threatened a punitive tax on banks paying big bonuses. Writing in today's Standard, he said: “People need to wake up and remember some hard truths. The reason why the banks are making money again is that taxpayers have bailed them out.”
Other key Tory plans include:
Handing sweeping powers to the Bank of England to oversee the health of the economy and to regulate the City.
Naming and shaming banks and building societies for mis-selling financial services or lending recklessly.
Dropping previous Tory plans to break up the biggest banks to split risky investment from high street branches.
Elite bankers would have to publish pay and confirm they are resident UK taxpayers.
The decision to beef-up the Bank of England sets the Tories at loggerheads with Labour, who have published plans to enhance the role of the FSA and keep the tripartite structure under which responsibility is shared between the FSA, the Bank and the Treasury.
Mr Osborne would have the Bank regulate pay structures, risk, complexity and size of financial institutions, and decide how much capital each would be required to hold.
A Consumer Protection Agency would stand up for ordinary people, with information online showing customers if they would be better off switching banks. There would be a Treasury Minister for European financial regulation.
Mr Osborne dropped plans to require banks to split up retail and investment activities.
Vince Cable of the Liberal Demorctas unveiled rival plans which involve keeping the FSA but breaking up the bailed-out Royal Bank of Scotland and Lloyds Banking Group.
He said the rescued banks had become “the financial equivalent of Chernobyl”. Mr Cable called for a Financial Stability Committee led by Bank of England governor Mervyn King.
Reader views (34)
Sir,
Either you have had too many good lunches at the FSA or have lost your marbles.
The FSA always has been a nonsense and over the last 12 years has patently got it wrong so much so it has sent out the message unwittingly that financial crime pays in the UK.
Endowment pensions, Critical Illness, Investment Trusts, its own rule book!!
In a perfect world the FSA would have credibility but it has been staffed by inexperienced graduates who are working within parameters set by their exceutives which are unworkable and singularly ineffective.
Each CEO has been worst than the last and each Chair full of rhetorical clap trap.
The old boy network of 73 and 84 caused the problems, as the principal of my word is my bond was felt to carry weight.
Are we to assume at that time you knew what was going on?
You are starting to write like a sad old hack who hasn't moved with the times, and the worst thing is you never admit you are wrong. A bee in your bonnet just seems to fly off elsewhere when no one is playing ball with it - your antagonist and very valid stance on investment banks is one point in particular that comes ot mind -
Contacts for interviews are not enough, and the only value now in your articles appears to be the last 100 words.
Perhaps it's time you hung up your pc as the fantasy world you live in bears no relevance to what is happening at ground level or failing that take some lessons for Chris Blackhurst who is clearly a master of his art.
- Robert Marshall, LONDON
When the switch actually takes place the BoE will realise they are short of about 600 staff to carry out their new duties. And I wonder where they will come from? I think you will find the old FSA staff will relocate to the Bank of England.It is not only banks they will be supervising according to the rule of George, but other "important instiututions including insurance companies".
What will happen to the role of the FSA as a listing authority? Who will oversee the LSE and AIM. What about the asset managers? And what of the 25000 small firms like mortgage brokers, IFAs? What of the reams of rules and legislation, eg FSMA 2000? Is that all being replaced? There are a lot of details that are not covered in Dave and Georgey boy's announcement. The faceless FSA staff are in the main low quality, ineffective and worst of all, for all their failings, SMUG so I will not shed a tear for them, but what will actually happen is the FSA banking and insurance staff will merely transfer to the BoE and the ones left on the consumer side will remain in the newly created Consumer Protection Agency with no doubt the same rules and legislationin place. So the same people will fill the same functions I am afraid.
- Lionkiller, London
If they get rid of the FSA, then who will regulate those small mortgage advisers?. Or regulating small insurance brokers?. Or even regulating your local car dealer, because they sold you car warantee (insurance).
The Bank Of England is not geared up to deal with the public.
- Rk, London
I trust the Bank of England much more than anything which was set up by Crash Gordon. Lot of the crash would not have happened if the Bank had oversights powers. Anyhow, in most countries it is quite rightfully the central bank keeping the commercial banks in check. Crash Gordon's FSA has failed us all big time!
- Jacqueline, Hampstead, London
The FSA haven't been effective at all. The Banks should be sold off and the businesses that are worth saving will be. Don't forget during all of this innocent Bank staff have lost their jobs and many more will. The accountability stopped in the wrong place, on the shop floor, not with the top brass. Lets save our Banks and if it means selling off great, losing the FSA, fantastic
- Johnnythedog, London
Never mind the FSA,start by scrapping George Osborne.
- Colin, Bristol
Osborne is trying to be populist but failing to be logical.
the banks making the big profits at the moment did not have to be bailed out...his statement is factually incorrect..
making staff salaries public is a brave move and realistically an issue of confidentiality. Why would anyone need to know the names and pay of individuals, it would need to be applied to all workers if it is to be seen as fair - ie banking, journalism, retain, telecoms - everything...is it right for neighbours to be able to look up each others pay online?
- Martin_Clerkenwell, london
The Bank of England were in charge of regulation when BCCI went bust.
- Neil, London, London UK
Everyone seems to forget that the Bank of England used to do all the regulating pre 1997 ok we had black wednesday but the Banks did not fail did they. The FSA Treasurer and to an extent were run by Brown they did his bidding if anyone stepped out of line they were smeared and then they had to quit. Mervyn King decided to speak out maybe because an election was looming but look at what the government said about him that is how Labour works tow the line or else. You cannot run a banking system like this it should be independant of the government look at RBS HBOS Lloyds RBS acquired all those other banks etc and was not stopped by the FSA becau7se Brown nodded it all through especially because it was a Scottish Bank and he wanted it to be the biggest. How many institutions have we bailed out in England really only Northern Rock and that is in Labour heartlands. Lloyds would not have need to be bailed out if it was not for Brown asking them to take HBOS. Bradford and Bingley is a northern building society and they passed that through in a weekend should not that be investigated. there are no other banks that have been bailed out also remember how old the Bank of England is hundreds of years it has always been at the heart of our financial system they do not call it the old lady of Threadneedle Street for nothing. it is part of our heritage we should give it pride of place part of our traditions.
- Jacqui Williams, peterborough cambs
Whilst the FSA did not do it's job properly - I very much doubt the Bank of England a bunch of bankers will be the right team to regulate either.
- Lyn, United Kingdom
Practise what you preech. Show the public you care by first paying back the GBP55,000 capital gains tax on your second home which you were able to afford due to cheap credit supplied by the very banks you are now targeting. Next, pay back the expenses you and others from both parties abused. It's okay for MP's to do what they like but others must follow another set of rules. Remember, bankers are mobile & many financial centres of the world are looking to attract bankers with lower taxes.
- Frank, Copenhagen, Denmark
Way to go, George - kick the FSA into touch, and sort out the stinking mess that Brown-stuff and his band of chancers, halfwits and charlatans have created over the past twelve years.
- Ted, London
Technically he doesn't owe any money Keith. 55k is small change compared to the billions gormless has wasted over the last decade on his failed pet projects.
- Chris, Rochester
When WILL politicians learn? It's not THEY who are in control, it's the BANKS! (stoopid)
- Michael Spencer, Toronto, Canada
knock knock.... hello Keith! Is there anybody there? Gordon Brown has proved that honesty is the last quality needed to be a chancellor.
- Goggs, London
Why didn't Brown give "OUR" money to industry and building etc. This would have saved a lot of jobs and let the crap banks go under and then just bail out savers and investors?
This would have got rid of many of the shark bankers and they wouldn't be able to glutton again on "OUR" money.
The banks should be there to serve not to gamble....
- R King, UK
"he [George Osborne] doesn't have Goedon Brown's honesty"
Keith Price, Luton - Now you're just being plain silly. To use the words "Gordon Brown" and "honesty" in the same sentence is an abuse of the english language.
- Malcolm, London
Well said, Da. Spot on.
- David, London
Keith Price - financial regulation is a serious matter and no time for jokes. Gordon Brown's honesty! Really.
- David, London
Errr, bankers like everyone else (except MPs who are paid on expenses) will be taxed at 50% on their bonuses. If you don't pay them, they'll leave government banks and go to competitors (as they are). It may not have clicked with some people, but just like not all MPs are crooked, or immigrants illegal, not all bankers are paid unjustly and do actually generate real returns for their investors (i.e. you and me). If you assume all MPs are crooked (note - Osborne actually is - see earlier capital gains tax comments..), all immigrants illegal and all bankers crooked, you end up with a bitter, twisted society that fails to see the world for what it is. We appear to be a nation of scapegoat seekers, when in reality, we were all at the house price explosion/cheap credit/cheap imports party.
- Da, london
Ha - Keith price is back. Is the medication kicking in again Keith. I do hope so.
- Jb, London
Well done George. So even if there's a bailout and presumably the taxpayers would hold a stake as a consequence, the Government would still refuse to exercise their controlling interest, choosing instead to implement little more than a cheap gimmick ?
- John, Twickenham
At last someone has realised that only by scrapping the FSA can we have a clear chance of effective regulation. There are just too many failed practices and mindsets entrenched there to merely try to reform. Well done Osborne.
- Jules_London, london
The money has been created out of nothing, does not actually exist. Only cause Banks have surety by the Government that pays interest, that legitimises the Funds does the taxpayer find itself in a Catch-22 situation.
If you can figure that out, then more than the PM is capable of.
- William, Hay~Heath UK
Please can you show the photograph of George wobbling along on his bike behind Dave, clearly hating every second of it.
- Carl, London
Quite clearly this mess has been operative for many years. I am sick of Labour but also believe the banks run the Government anyway. Stop pumping money into these leaches and just bail out Jo Public, then close the failed banks down. It'll save millions of our money.....and why trust the Tories.....politicians say anything slightly credible to get elected, as you know.
Let us please stop using one single policy to remove current administration, use the whole picture. When we actually know what the Conservatives will do for us, we can then decide. Note - "what they can do for us", and, for me, it's not about personal wealth, it's about getting the whole country off it's knees.
- Rod, Epping, UK
Don't forget, George Osborne still owes Her Majesty's Revenue the sum of £55,000 capital gains tax on the sale of his taxpayer-subsidised second home. "
Precisely. he isn't exactly the sort of guy anyone should be seduced into trusting. He will never be a chancellor. he doesn't have Goedon Brown's honesty
- Keith Price, Luton, England
I have no faith left in British Governments or British Financial Institutions.
If WW3 starts in the future; I will join the other side; because the other side ends up owning the UK anyway, and they get the lot on the cheap.
British Governments would sell their own mothers for a pound.
- Mickinlondon, london.
The FSA were set up to regulate the banking system.
They were plainly useless at it so we dont need them.
The sooner they are closed down the better.
- Mr S.Port, London
Sounds better than current Government which has been too in bed with Financial sector to reform it. But the prime way to effect reform is to take individual bank directors from current crisis through the courts and heavily penalise those culpable.
If individual bankers, financiers and hedge fund managers are not prosecuted, and successors not made genuinely fearful of imprisonment, then bank leaders will continue to laugh at us taxpayers right up to the next bail out.
The lack of redress and letting individual bank directors off the hook to date is a disgrace and it is hard to believe that the country has been ever worse served than by the current Govt.
- Jim, London
Good riddance to the FSA. They really haven't a clue.I rang to report a serioufraud and was told they had a three day call back policy.Hopeless!
- Alan,Wimbledon., Wimbledon
Scrap the regulators? Yes, that'll be really useful - NOT! hasn't he heard the saying "don't put all your eggs in one basket"?
- Marianne, SW France/London
Um, didn't the BOE do about the same as the FSA about the regulating the current crisis (i.e. nothing)? In fact, many of their staff actually warned that it was coming and they ignored them, so why on earth does Georgey boy think they can do better than the FSA (who admittedly are not fit for purpose)?
- Bob, Cheam
Don't forget, George Osborne still owes Her Majesty's Revenue the sum of £55,000 capital gains tax on the sale of his taxpayer-subsidised second home. This pretender to the Treasury clearly believes only the Little People pay taxes.
- Neil, London, London UK
