June 15 (Bloomberg) -- Chancellor of the Exchequer George Osborne will publish draft legislation tomorrow that hands powers to the Bank of England to police Britain’s banks in the biggest regulatory overhaul since 1997.
The Financial Regulation Bill will be published for so- called pre-legislative scrutiny, according to a person with knowledge of the bill’s contents. It will give lawmakers the chance to pick through legislation that will abolish the U.K.’s Financial Services Authority and transfer most of its powers to the central bank, said the person, who declined to be named because the plans aren’t public. Treasury minister Mark Hoban intends to spell out the plans in detail to Parliament tomorrow.
The bill is scheduled to be put to Parliament formally later this year and approved by legislators in late 2012. It will pave the way for the central bank’s Financial Policy Committee to begin its work of monitoring risk. The committee -- chaired by Governor Mervyn King -- will meet informally for the first time tomorrow and will get full legal powers just as King’s second five-year term as governor expires.
King and Osborne began work last June, a month after Prime Minister David Cameron’s coalition government took office, on the regulatory overhaul, which will give the Bank of England more power than it has ever had in its 317-year history.
The bill will take more than twice as long to obtain approval from Parliament as the legislation that gave the Bank of England its independence more than a decade ago. That will deprive King of the mantle of being the only major central banker to have control of both monetary policy and financial regulation.
The timetable reflects differing views between King and the government on issues that include the amount of capital banks should hold, three people familiar with the matter said earlier this year.
When the previous Labour government came to power in 1997, Gordon Brown, the chancellor at the time, handed the bank powers to set interest rates, while stripping it of supervisory and some financial stability powers that it is now set to regain.
The Treasury Committee of the House of Commons, the cross- party panel that scrutinizes economic policy, said in a report in February that the government should publish “as soon as possible” the “nature of the powers” to be given to the FPC and the tools as its disposal. It also called for non-bank members to be involved in its decisions.
The legislation will also establish the Prudential Regulation Authority, the body that will be responsible for overseeing all deposit-taking institutions, insurers and investment banks and effectively replaces the FSA. The FPC may be granted powers to require the new regulator to conduct stress tests on banks to monitor risks as part of an overhaul of financial supervision.
The proposals will also map out the creation of the Financial Conduct Authority, a body that will seek to protect consumers and police the integrity of markets.
--Editors: Eddie Buckle, Fergal O’Brien
To contact the reporter on this story: Gonzalo Vina in London at email@example.com
To contact the editor responsible for this story: James Hertling at firstname.lastname@example.org