Tory officials admitted last night the FSA could survive the planned shake-up of banking regulation.
While the Bank will be given macro-prudential control, monitoring systemic risk in the economy, the Liberal Democrats insisted it should not also be responsible for regulating individual banks.
Last night, Tory officials said under the new system, the Bank of England would only have “oversight” over the supervision of banks.
“It would have been a big step to cast the FSA aside in its entirety, so this compromise is not terribly surprising,” said Peter Curran, director of intermediary mortgage lending at Lloyds Banking Group.
“Now it is a question of sorting out just how much power the FSA and the Bank of England will have, and clarifying their remits.”
Lib Dem Vince Cable who will take charge of ‘business and banking’ has been primed to head up an independent commission which will consider breaking up big banks into separate retail and investment arms. It will report back within a year.