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 it.

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 go?
 

U.K. Scraps FSA in Biggest Bank Regulation Overhaul Since 1997
Bloomberg (6/16/2010)

U.K. Shakes Up Bank Regulation; FSA Will Be Broken Up
Wall Street Journal (6/16/2010)

Osborne unveils U.K. regulatory shake-up
MarketWatch (6/16/2010)

Mervyn King to take over regulation of the City as FSA disbanded
Guardian (6/16/2010)