By 2012, the FSA will be dismantled and replaced by the Financial Policy Committee, the Prudential Regulatory Authority (PRA), and the Financial Conduct Authority (FCA).
The FPC will be part of the Bank of England (BoE) and will act as a macro-prudential regulator. The PRA will also be a subsidiary of the Bank, whilst the FCA will regulate the conduct of business.
However, concerns have surfaced over the roles of the PRA and FCA – the ‘twin peaks’ – which together will regulate the insurance, investment and advice industries.
Chris Leslie, shadow financial secretary to the Treasury, said: “Our system is based on prudential and conduct regulation.
“However Europe’s system is thematic by type of industry, so it has the European Banking Authority, the Insurance and Pensions Authority and the Securities and Markets Authority.
“The twin peaks structure has not been properly thought out and is not fit.”
Clement Booth, chairman of Allianz UK, said: “The FSA worked well. I hope we do not end up with two competing groups trying to regulate us.”
But a Treasury spokesperson defended the new system.
“It is not necessary for the responsibilities of domestic regulators to exactly map onto those of the European bodies to be well coordinated with them,” said the spokesperson.
“The PRA and FCA will work together to ensure the other regulator is kept fully informed of any matters due to be discussed in EU bodies that fall into their sphere of responsibility.
“This should mean, for example, if a conduct-related issue is discussed in the European Banking Authority, the PRA should consult the FCA’s views in advance, invite the FCA to attend the meeting as a non-voting observer and take the FCA’s views into account in any vote.”
They added the legislation enshrines a duty on regulators to coordinate with each other and foreign regulators.
