A CONSERVATIVE government would abolish the &ldquo;failed&rdquo; tripartite system of financial regulation and hand chief responsibility for supervision back to the Bank of England, shadow chancellor George Osborne will confirm today.<br /><br />Osborne will outline plans to dismantle the regulatory architecture designed by Gordon Brown in today&rsquo;s response to chancellor Alistair Darling&rsquo;s white paper on financial regulation.<br /><br />The regulatory overhaul would see a reshaping of the Financial Services Authority with the City watchdog replaced by a Consumer Protection Agency with responsibility for acting in the interests of customers of financial products. The Bank would take on sole responsibility for the prudential regulation of financial institutions, including the monitoring of pay and higher, counter-cyclical capital and liquidity requirements.<br /><br />A new Financial Policy Committee would monitor systemic risk and implement special resolutions on banks when necessary, while levies on banks would be hiked to fund the increased remit of the central bank.<br /><br />Osborne would also create a senior Treasury minister post with specific responsibility for European financial regulation to &ldquo;build alliances and defend Britain&rsquo;s interests&rdquo;. <br /><br />He insisted the Tories did not intend to break up investment and retail banks, saying that if Britain acted alone to split banks they would simply move their operations outside the UK. They will, however, lobby for an international agreement on the issue but would not act unilaterally.<br /><br />And the Tories would sell Treasury stakes in RBS and Lloyds to smaller or new players in the industry, to prevent any impact on competition in the sector when they are returned to private ownership. The Liberal Democrats will unveil their own white paper today, with key policies including the break-up of RBS and Lloyds, and a long-term role for state banking.<br />