FSA replacement to face greater scrutiny

The Consumer Protection and Markets Authority (CPMA), one of the bodies set to replace the FSA from 2013, will be subject to audit by the National Audit Office (NAO) under rules proposed by the Treasury today.

A regular NAO inspection will "deepen accountability and transparency" and allow the NAO to report on the effectiveness of the CPMA, it says. The Public Accounts Committee would then scrutinise the reports.

The FSA is set to be audited for the first time by NAO for the 2010/11 financial year.

As part of the coalition's plans to break up Labour's tripartite regulatory system, the CPMA will assume all conduct of business and supervisory responsibilities from the FSA.

A Prudential Regulation Authority (PRA) will be responsible for the prudential regulation of individual firms, under the guidance of a Financial Policy Committee. Both will be subsidiaries of the Bank of England in an overhaul the Treasury estimates will cost £50m.

According to today's Treasury consultation paper, the CPMA will also be required to produce an annual report to be laid before Parliament and to hold annual public meetings.

It will have a duty to maintain a complaints mechanism similar to that expected of the FSA, while its decisions will be subject to appeals in the Upper Tribunal.

The Treasury says Panels can provide an "important consultative mechanism" so it will retain both the Consumer Panel and the Practitioner Panel.

In recognition of the "important role it has played since its creation", the Small Business Practitioner Panel will also be placed on a statutory footing.