Chancellor 'Banking On Change'

It's all change in the banking world this week as Chancellor George Osborne has confirmed that he will give the Bank of England the key role in regulating the UK financial sector.

He has confirmed that the Financial Services Authority (FSA) would be broken up and the part that monitors financial institutions would continue as a "new prudential regulator" but would operate as a full subsidiary of the Bank of England.

In his first Mansion House speech, Mr Osborne said also revealed that Hector Sants, the Chief Executive of the FSA, would stay on to oversee the transition.

Apart from the scrapping of the FSA - and the handing over of its regulatory duties - to an increasingly all-powerful Bank of England, Mr Osborne also confirmed there would be a bank levy and further action on pay and bonuses.

But most significantly he announced a new banking commission to overhaul the City. It will examine breaking up the major banks; the competitiveness of the City; whether power had become too concentrated among some leading city institutions; and whether there should be restrictions on bank activities.

In Mr Osborne's words it will be "a new settlement between our banks and the rest of society".

Earlier, Mr Osborne had told the House of Commons that Sir John Vickers, former boss of the Office of Fair Trading, would chair a commission to look into the potential break-up of the UK's biggest banks.

The independent commission will take at least a year to review whether casino-style investment banks should be split from deposit-taking institutions on the High Street.

(BMcC/GK)