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June 16, 2010    

Osborne to announce new powers for central bank

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by Kay Murchie

Chancellor George Osborne is today expected to hand over more responsibility to the Bank of England.

The move comes just a few days after the BBC reported that City Watchdog, the Financial Services Authority (FSA), will be retained – as a subsidiary of the Bank of England.

It was expected that the watchdog would be axed under initial proposals from the Conservative Party.

However, Mr Osborne will today unveil plans to keep part of the FSA, while also creating a new Financial Policy Committee, comprising of Bank executives with a direct responsibility for financial stability and senior representatives from the FSA.

The FSA was set up in 1997 by then Chancellor Gordon Brown and its objective was to regulate the financial services industry.

However, oversight of the financial system was shared between the FSA, the Bank of England and the Treasury – something which Mr Osborne has long been critical of.

In his first Mansion House speech, he is expected to say that the FSA will continue to have the responsibility of overseeing individual banks.

The move is intended to prevent another credit crisis after the FSA was the subject of some criticism for not doing enough to prevent or limit the crisis in the financial markets.

The Chancellor is also expected to confirm that Britain’s banks will be hit with a new levy.

Mervyn King, the Bank of England’s Governor, will also give a speech at the Mansion House tonight.

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