George Osborne, the new Tory chancellor, has been forced to water down plans to hand over banking supervision to the Bank of England under a five-year coalition deal struck with the Liberal Democrats.
Tory officials admitted that the Financial Services Authority could survive the planned shake-up of banking regulation, a move that will delight many in the City who feared that Mr Osborne’s original plan would lead to serious upheaval.
While the Bank will be given macro-prudential control – monitoring systemic risk in the economy – the Liberal Democrats insisted that it should not also be responsible for regulating individual banks. On Tuesday night Tory officials said that under the new system, the Bank of England would only have “oversight” over the supervision of banks. “The FSA might survive,” one aide to Mr Osborne confirmed. More on ft.com.
