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Osborne to scrap FSA and beef up the Bank

THE BANK of England will become the UK&rsquo;s main financial regulator and the Financial Services Authority (FSA) will be abolished if the Conservatives win the next election, shadow chancellor George Osborne said yesterday.<br /><br />In the Tory response to chancellor Alistair Darling&rsquo;s white paper on financial regulation, Osborne said he would &ldquo;lead the British economy from crisis to confidence&rdquo;.<br /><br />The Bank would assume responsibility for financial stability, with the FSA&rsquo;s rump replaced by a Consumer Protection Agency aimed at protecting customers. A new Financial Policy Committee would be at the heart of the Bank&rsquo;s efforts to maintain financial stability.<br /><br />Like Labour, the Tories would establish tighter capital and liquidity requirements for risky institutions. There will be no unilateral compulsory Glass-Steagall-style separation of investment and retail banks but the Tories may still lobby for an international agreement on the subject. Banks engaging in proprietary trading would have to hold more capital.<br /><br />The OFT and Competition Commission would be asked to look into the best way to dispose of government stakes in Royal Bank of Scotland and Lloyds Banking Group, to lessen the impact of consolidation on competition in the sector.<br /><br />Osborne also promised to create a new Treasury minister to liaise with Brussels and said his party would fight attempts to establish an executive pan-European supervisor.<br /><br />David Cameron said the Conservatives would address the budget deficit by reining in spending on schemes such as the ID card system. Cameron said: &ldquo;To those who say our plans will tie the hands of future governments, I say &lsquo;Yes it will. Good.&rsquo;&rdquo;<br /><br /><strong>10 KEY POINTS OF OSBORNE&rsquo;S PLAN</strong><br /><br />&9679;&nbsp; Hand responsibility for prudential regulation back to the Bank of England.<br /><br />&9679;&nbsp; Establish a Financial Policy Committee to monitor systemic risk and implement special resolutions.<br /><br />&9679;&nbsp; Higher capital requirements based on the remuneration policy, riskiness, complexity and size of financial institutions.<br />&9679;&nbsp; Levy on banks to be increased to fund a scaled up Bank of England.<br /><br />&9679;&nbsp; Establish a Consumer Protection Agency, replacing the rump of the FSA, mandated to look after the interests of consumers of financial products. <br /><br />&9679;&nbsp; Create a senior Treasury minister to fight the UK&rsquo;s cause in Europe.<br /><br />&9679;&nbsp; No unilateral policy to forcibly separate retail and investment banking; but lobby for a possible international agreement. Proprietary trading at universal banks to require more capital<br /><br />&9679;&nbsp; Oppose EU plans for a pan-European executive regulator.<br /><br />&9679;&nbsp; Consult the OFT and Competition Commission on market power; possibly break-up or carve-up RBS and Lloyds.<br /><br />&9679;&nbsp; Force lenders to be more transparent in consumer charges, providing standardised information which can be easily compared against competitors.