Today the Chancellor of the Exchequer announced a sweeping change in
financial regulation in England. Within the next two years, the FSA
will be replaced by three other organizations, with the bulk of its
powers folded into the Bank of England.
While the FSA Chairman "welcomes" the plan announced by the
Chancellor, one has to wonder what the rest of the City thinks of
And what does this mean for financial regulation (and regulatory
reform) around the rest of the world? This is, after all, the
sticking point that Congress has had trouble getting over in the
course of American financial reform discussions - the complete removal of a regulator.
On a more local level, what does this mean for the SEC-FSA strategic
dialogue? With its fifth meeting completed in February, under the umbrella of
the 2006 Memorandum of Understanding between both agencies, the
question arises as to whether the bonds of regulatory cooperation will have to
be completely re-forged.
The FSA had been having a fairly good
year - in the last six months alone it levied its largest individual fine ever,
agreed to improve cooperation with the SEC, and successfully ran its largest
investigation to date against
insider trading. While the general idea
seems to be that the FSA's handling of the financial crisis was
the proverbial straw, did it really do so bad a job that it had to