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The Financial Services Authority may be stripped of power

An influential House of Lords committee has today recommended that the Financial Services Authority should be stripped of some of its powers and the Bank of England become more active in the regulatory environment again. This is a complete reversal of Gordon Brown's 1997 move which saw the creation of the Financial Services Authority and took away many regulatory obligations and operations from the Bank of England.

Yet again we see the Financial Services Authority under significant pressure with critics quick to highlight a number of shortfalls and failings over the last few months. While it may be unfair to blame the economic recession and the credit crunch on the Financial Services Authority, many people believe that various stress tests and projections should have been more alert to the possibility of a significant economic crisis. Along with the UK government and the Bank of England, the Financial Services Authority has been accused of reacting very slowly to the crisis.

While there is no doubt that the report carries credence amongst MPs and others in the banking industry it is highly unlikely that Gordon Brown will reverse his 1997 move and reduce the power of the Financial Services Authority. To do so would be an admission of failure and that is something which Gordon Brown does not do.

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