FSA To Be Abolished
The new Chancellor of the Exchequer, George Osbourne, announced yesterday in his first Mansion House speech that the Financial Services Authority (FSA) would be scrapped and the regulation of loans and other financial products would become the responsibility of the Bank of England. The new regulator will be called the “Consumer Protection and Markets Authority” (CPMA).
The FSA was introduced by the previous Labour government and many experts blame the financial regulator for the effects of the credit crunch and banking crisis, for not regulating the banks properly and allowing them to offer loans irresponsibly, without maintaining the adequate levels of capital protection for the loans on their books.
Mr Osbourne announced that there would be a new “prudential regulator” introduced to replace the FSA and this would be a subsidiary of the Bank of England, who will take over the task of ensuring that banks offer home owner loans and mortgages responsibly as well as maintaining adequate capital resources.
The FSA has come under much criticism from all sides over the years, for the way it has handled the regulation of financial services and in particular the home owner loan and mortgage markets as well as the banking sector.
The Conservative party announced as part of its election campaign, that the FSA would be abolished if they got into power and although this transition to the new regulator will now happen by 2012, the more cynical of us who have worked in the financial services industry for many years may wonder if there will actually be any improvement in the regulation of the home owner loan industry and financial services in general.
There is a lyric from an old song by the Who which springs to mind “Meet the new boss…same as the old boss”. It was also announced that Hector Sants, the current head of the FSA, will also be the head of the new regulator!
