In his review of the tripartite regime for Shadow Chancellor George Osborne, former Treasury adviser Sir James Sassoon says the tripartite regime has “failed in critical respects” and needs significant reform.
He says the FSA must be reorganised to ensure that prudential regulation and conduct of business divisions are its core focus or two separate bodies should be created to replace the regulator.
If the FSA continues, it must be stripped of other respon- sibilities, such as financial crime and consumer education, says Sassoon.
He says the Bank of England should take over macro-prudential issues to ensure the financial system “is not again allowed to become dangerously overleveraged”.
He says the BoE should write public letters to the micro-regulator, setting out the bank’s views on systemic risk and the regulator should have to make a public response.
Sassoon says: “We should look at giving the Bank of England powers to take direct regulatory action on individual companies if it believed the micro-prudential regulator was failing. Some argue that we should fold micro-prudential regulation back into the Bank of England, this also merits consideration.”
Highclere Financial Services partner Alan Lakey says: “We have reached a stage where the beast has come to the end of its life and must be put down. We now need a regulator that is distinct from the banks that understands the advice sector and how it operates.”
Need An Adviser director Jo Roberts says the FSA should not be scrapped because the taxpayer could not afford the associated costs of the move. She says: “The FSA should now focus its work on prudential regulation and conduct of business because that is its expertise.”