Hoban reveals 'twin peaks' City regulation

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The Independent Online

The Treasury is planning to publish its radical proposals for the City's new "twin peaks" regulatory structure, which hands banking supervision back to the Bank of England, over the next two weeks.

Mark Hoban, the Financial Secretary who is charged with putting flesh on the architecture of the new structure, is drawing together final submissions from the Bank of England and the Financial Services Authority, which is to be broken up. He will be releasing the consultative document by the end of parliament on 29 July. The document will be sent out to interested parties in the City, who will be given three months to comment on the details of the most fundamental reform of the UK's banking and markets supervision for decades.

The proposals, first announced by the Chancellor, George Osborne, at the Mansion House last month, will include more details on the workings of the new Prudential Regulatory Authority, a subsidiary of the Bank to be headed by the chief executive of the FSA, Hector Sants. It will supervise prudential regulation of all financial firms, banks, building societies and insurance companies.

Mr Hoban's document will also spell out how the independent Financial Stability Committee, which will have the tools and responsibility to look at the macro prudential issues will operate.

It has also emerged that:

*The Bank hopes to have a skeletal FSC, to be chaired by the Governor, operating in shadow form by the autumn. The committee will include a Treasury representative – other members will be drawn from academia and relevant industry sectors but not current bankers. The FPC, which is modelled on the Monetary Policy Committee, is unlikely to have an MPC-style voting structure as so much of its work monitoring the health and capital requirements of individual banks will be confidential.

*The PRA will be based in a building in Threadneedle Street.

*The PRA will have heavy-hitters – more experienced than the FSA supervisors – who will be encouraged to see the work as "public service."

*Salaries and costs will be lower than those of the FSA.

Treasury and Bank officials are working flat-out on the finishing touches to the proposals which will also outline plans for the Consumer Protection and Markets Authority, the powerful new authority which will police financial firms.

The coalition Government hopes to get the framework for legislation ready so that the switch to the new bodies can be made in early 2012.