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Chancellor George Osborne looks set to announce on Wednesday sweeping new powers for the Bank of England to police the financial sector and prevent another credit crisis.
In his first "Mansion House" speech to the City of London's finance elite since taking office last month, the Chancellor is expected to say that ultimate responsibility for financial supervision should lie with the central bank.
This could involve the creation of a new post styled something like the "chief executive for financial regulation," equivalent perhaps to a third deputy governor, who would sit on a powerful new Financial Policy Committee.
Dismantling Britain's tripartite regulatory system and abolishing the Financial Services Authority, set up in 1997 by Labour's then chancellor Gordon Brown, had been a pledge for Osborne's Conservative Party before the May 6 election.
But an inconclusive election result on May 6 which has forced the Conservatives to get into bed with the smaller Liberal Democrat party had raised doubts over whether the FSA would be completely abolished.
The coalition government simply promised that the Bank would get "control of macro-prudential regulation and oversight of micro-prudential regulation."
What that means is that the central bank will get new tools to control, for example, credit binges, by demanding banks hold more capital -- macroprudential regulation -- and also oversee the supervision of individual institutions.
The precise nature of the new tools, however, is likely to be the subject of much international debate and could take time to come into place.
Speculation has risen that the FSA will continue to function in some form but would become a subsidiary of the Bank in order to prevent a vacuum or brain drain that could occur if the body were just to be closed down.
Analysts had also wondered about the wisdom of giving too much power to one body. Brown had created the FSA following a widespread perception that the Bank was not up to the job following the 1995 collapse of Barings, a venerable investment bank.
The Conservatives had also promised the creation of the Financial Policy Committee before the election and Osborne is expected to flesh out his plans for this on Wednesday at the annual set piece event for bankers.
Both Bank Governor Mervyn King, who will also address the Mansion House dinner on Wednesday, and Deputy Governor Paul Tucker would be on the committee.
The FPC's primary responsibility will be to preserve financial stability and it would have power over things like capital requirements and be able to make judgements about whether certain mergers were acceptable.
In his first "Mansion House" speech to the City of London's finance elite since taking office last month, the Chancellor is expected to say that ultimate responsibility for financial supervision should lie with the central bank.
This could involve the creation of a new post styled something like the "chief executive for financial regulation," equivalent perhaps to a third deputy governor, who would sit on a powerful new Financial Policy Committee.
Dismantling Britain's tripartite regulatory system and abolishing the Financial Services Authority, set up in 1997 by Labour's then chancellor Gordon Brown, had been a pledge for Osborne's Conservative Party before the May 6 election.
But an inconclusive election result on May 6 which has forced the Conservatives to get into bed with the smaller Liberal Democrat party had raised doubts over whether the FSA would be completely abolished.
The coalition government simply promised that the Bank would get "control of macro-prudential regulation and oversight of micro-prudential regulation."
What that means is that the central bank will get new tools to control, for example, credit binges, by demanding banks hold more capital -- macroprudential regulation -- and also oversee the supervision of individual institutions.
The precise nature of the new tools, however, is likely to be the subject of much international debate and could take time to come into place.
Speculation has risen that the FSA will continue to function in some form but would become a subsidiary of the Bank in order to prevent a vacuum or brain drain that could occur if the body were just to be closed down.
Analysts had also wondered about the wisdom of giving too much power to one body. Brown had created the FSA following a widespread perception that the Bank was not up to the job following the 1995 collapse of Barings, a venerable investment bank.
The Conservatives had also promised the creation of the Financial Policy Committee before the election and Osborne is expected to flesh out his plans for this on Wednesday at the annual set piece event for bankers.
Both Bank Governor Mervyn King, who will also address the Mansion House dinner on Wednesday, and Deputy Governor Paul Tucker would be on the committee.
The FPC's primary responsibility will be to preserve financial stability and it would have power over things like capital requirements and be able to make judgements about whether certain mergers were acceptable.
