Queen's Speech: FSA future hazy as Bank handed supervisory powers

The Financial Services Regulation Bill has confirmed the regulatory buck now stops with the Bank of England (BoE), not the FSA.

As expected, the Bill will give the BoE control of macro-prudential regulation and, crucially, oversight of micro-prudential regulation.

While it is not clear whether the FSA will be scrapped altogether, in a speech written by Prime Minister David Cameron, the Queen hinted today's Bill was a vote of no-confidence in the City watchdog's handling of the financial crisis.

In her opening remarks to Parliament in which she presented 24 Bills outlining the coalition government's political direction for at least the next 18 months, the Queen said: "Legislation will reform the framework for financial services regulation to learn from the financial crisis."

The purpose of the Financial Services Regulation Bill is to "ensure that aggregate risk and imbalances in the economy are properly monitored and managed, thereby helping maintain financial stability".

Today's Bill clearly overlaps the legislation which gave powers to the FSA in 2001, when the regulator was tasked with fulfilling five "specific, and equal, objectives" by Parliament.

According to the FSA, these are "maintaining market confidence, promoting public understanding of the financial system, contributing to the protection and enhancement of the stability of the UK financial system, securing the appropriate degree of protection for consumers and fighting financial crime".

In practice, the regulator say this means it wants "to make markets work effectively to deliver benefits to firms and consumers.

"We operate a risk-based approach concentrating on the big risks and accepting that some failure neither can, nor should, be avoided.

"Potential risks are prioritised, using impact and probability analysis, and we then decide on an appropriate regulatory response - in other words, what approach we will take and how much resource we will allocate to mitigating the risk."

However, with final "oversight" being given to the BoE, today's legislation would seem to snatch many of those powers away from the regulator, which would raise questions about the shape of its future role.

In addition, the FSA could also be under threat from the Public Bodies reform Bill.

It is set to cut the number of quasi-autonomous non-governmental organisations - quangos - of which the FSA is one, with a view to saving £1bn a year.

An FSA spokesperson says the regulator is committed to carrying out its 12 month business plan, published in February.

She said: "We do not comment on political announcements. Our work continues and we will continue to deliver on our business plan".

The full list of Bills can be found here.

The other key money bills

• Office for budget responsibility bill.

Sets up the OBR to take responsibility for producing budget forecasts, meaning the chancellor - who under the current arrangements is in charge of producing his own forecasts - won't be able to twist the figures.

• National insurance contributions bill

Raises income tax allowances, so "most people would be better off relative to the previous government's plan", funded by a rise in national insurance. Reallocates tax worth around £9bn.

• Pensions and savings bill.

Implements the findings of the Government review of the state pension age. Currently the state pension age will increase to 66 after 2024. The review will propose bringing that forward. The bill will also restore the earnings link from 2012.