The UK Treasury has launched a consultation on its plans to reorder financial regulation, breaking up the country’s super-regulator, and handing new powers to its central bank.

Earlier this year, the newly-elected British government declared that it would break up the UK’s integrated financial regulator, the Financial Services Authority, giving responsibility for prudential regulation and systemic stability to the Bank of England, and creating a new consumer-focused regulator, the Consumer Protection and Markets Authority, to defend consumer interests. On Monday, it initiated a public consultation on those plans.

The consultation seeks views on the composition of the proposed new regulatory architecture, including the scope, objectives, powers, and governance arrangements for the new regulatory bodies (the financial policy committee, the prudential regulation authority, and the consumer protection and markets authority), and issues concerning the relationship between them.

The Financial Services Consumer Panel, a statutory body that aims to represent consumer interests, said that it would push for more straightforward financial products, after it conducted research on consumer fairness that found consumers considered financial services less fair, insufficiently competitive and less accessible. It also singled out complex products as particularly unfair.

“It is worrying that consumers perceive financial services as getting less fair. There is a need for more straightforward financial products to allow consumers to exercise choice,” said Kay Blair, vice chair of the Consumer Panel. “Consumers rightly regard financial services as an essential part of life. The industry needs to do more to increase transparency, giving customers clear and meaningful information, so that they see an improvement in standards of customer service and greater ability to compare products.”

“We look forward to the government’s expected consultation on financial services regulation where we will be pushing for measures which will make financial services fairer,” she added.

The government says it intends to introduce legislation to create the new regulatory authorities in the current Parliamentary session, and expects passage of primary legislation to be completed in the next two years. The FSA will retain its current responsibilities throughout the transition period, although a new interim Financial Policy Committee will be established in the autumn on a non-statutory basis. The FSA intends to move to separate conduct and prudential regulation in shadow form in the first quarter of 2011.

In launching the consultation, Financial Secretary to the Treasury, Mark Hoban said, “The coalition government is delivering on its commitment to reform the financial system, to avoid repeating the mistakes of the recent financial crisis and to ensure that taxpayers are protected. Today is a crucial milestone in our programme of reform. To take this forward, we would welcome the input of everyone who has an interest, including regulators and the regulated community, to ensure that we get the design right.”

IE