plans for reform of financial services regulation. In the eight months since they announced their opposition to the existing tripartite system and intention to replace it by transferring responsibility for banks and other major financial institutions to the Bank of England and re-shaping the Financial Services Authority into a Consumer Protection Agency, any clarity there was in these plans has ebbed away. It begins to look increasingly like a policy that was made in a hurry and which they are now regretting.
The need for clarity is now urgent and here are some points the Tories could start with.
1. Timescale. One minute they are saying that it all needs to happen quickly, the next they are saying the new CPA will be up and running within the lifetime of the next Parliament. In case anyone has forgotten a full Parliamentary term could run for five years. That is far too long. Which brings us to the next point.
. A huge number of discussions are going on in Europe, the USA and in global institutions like the International Monetary Fund
about the future shape of financial regulation. How is the UK view going to be articulated when the institutions that represent us at these discussions are in a state of flux (if not confusion)? There is a real danger that many decisions will be taken that are detrimental to the UK's financial services sector but over which we have had very little influence.
3. Market supervision. The FSA currently has responsibility for supervising the financial markets. This isn't planned to go to the Bank of England but, also, doesn't sit readily in a Consumer Protection Agency. The Tories have quietly acknowledged this and have even suggested that a third regulatory body could be created to look after market supervision. They need to clear up the confusion.
4. Investigatory powers. News that a separate policy group to look at the investigation and punishment of financial crime has been set up under the shadow attorney-general suggests that further fragmentation of the current FSA is being considered. This doesn't seem to make alot of sense but could find its way into the Conservative manifesto with very little input from outside the party's policymaking machine.
5. Costs. Always a contentious area when it comes to regulation and one that is giving rise to alot of complaints already, especially from sectors like general insurance which feels that it is being asked to pay for the consequences of failure to regulate the banks effectively. The shadow financial secretary to the Treasury, Mark Hoban, has conceded that the new CPA could be more costly to run than the FSA as it will need to be more "intrusive" and have a higher level of expertise on its staff.
6. Leadership and blight. FSA boss Hector Sants is going, the Tories don't seem to like Mervyn King, staff are leaving the FSA and recruitment has become difficult against this back-drop of uncertainly. There is a real problem - crisis would be too strong a description but it will come to that if action isn't taken soon. Strong political leadership is needed. Clarity on the policy would be a start but it will then need speedy action to put the right people in place.
People in the financial services sector are getting nervous about the lack of clarity in the