New dawn in regulation as Osborne launches PRA
George Osborne will today reaffirm the Government's commitment to learn lessons from the banking collapses and mis-selling scandals of the past as he joins Sir Mervyn King, Governor of the Bank of England, to launch the Prudential Regulatory Authority, a new subsidiary that will police financial stability.
Under the new "twin peaks" regime that replaces the Financial Services Authority, protecting the consumer falls to a new, independent regulator, the Financial Conduct Authority.
"The changes coming into effect today are the start of resetting the system of financial regulation in our country," the Chancellor will say. "They represent a fundamental change in how financial services will be regulated in the future. They do away with the discredited system that failed to sound the alarm as the financial system went wrong, and put in its place a new system that puts the Bank of England back in charge."
The Financial Policy Committee that oversees the PRA has already made its presence felt among Britain's banks, instructing them to raise an extra £25 billion in capital reserves by the end of the year.
The new regime comes into force just as business activity in the financial services sector rebounded strongly in the past three months.
The latest survey from the Confederation of British Industry and PricewaterhouseCoopers reported that profits are on the rise thanks to an increase in income from fees, commissions and premiums. However, the pace of growth was slower than expected because of a surprise rise in staff costs, following employment growth.
"This has been a strong quarter for the financial services sector," said Matthew Fell, the CBI's director for competitive markets.
However, he warned that problems in Cyprus risked reigniting concerns about stability of the eurozone.
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