Reduced powers for Bank of England

Avoiding Past Scandals

The current stucture of financial regulation was only established in 1986. It was a mishmash of self regulation of some sectors such as unit trusts and personal investments and statutory regulation of other areas, such as banking which was watched over by the Bank of England.

Self regulation means that the authorities work hand in hand with the industries own recognised professional bodies, with statutory regulation the Government lays down the law and ensures that it is followed with legal sanctions against those who break the rules.

This mix of systems is going to end. Instead one new super regulator is going to be created - the Securities and Investment Board. It will take over banking regulation from the Bank of England and have fully statutory powers to regulate nearly all other areas of the financial sector as well.

"The idea that this is self regulation has long been recognised by all of us as a complete fiction and in fact rather a damaging fiction at best," said Collete Bowe, chief executive of the Personal investment Authority, which will disappear under these proposals.

"I don't think it's helped to invest the confidence - so we're very pleased that the government is taking these steps which will put an end to this damaging fiction once and for all we hope," she said.

But no all reaction has been positive. Some analysts in the City have expressed reservations, arguing the Chancellor has gone too far.

"The decision to get rid of self regulatory agencies and bring all the various regulatory agencies under one roof, as I see it a good one," said Robin Munroe-Davis, a banking analyst.

"But I think the idea of bringing banking supervision into this regulatory agency is not a good one, because I think it would be big enough as it is already and I think banking supervision is best done by the Bank of England," he said.

The job of the new more powerful Securities Investment Board will be to streamline the present complicated system of regulation, inprove supervision of the industry and thereby increase public confidence in the financial services industry.