Darling plans strong FSA

CHANCELLOR Alistair Darling is set to unveil a new Banking Act which will strengthen the Financial Services Authority (FSA), in a move that flies in the face of Bank of England governor Mervyn King’s calls for the central bank to be given greater powers.

Darling wants the FSA to assume the role of overseeing financial stability, a function for which the Bank currently has partial responsibility, and is preparing to introduce legislation before the end of the year to force the change through.

Under the proposals, the FSA would gain the power to question the behaviour of banks and enforce changes to corporate strategy if it believes a lender’s practices carry an inherent risk to the economy.

Darling’s plans run contrary to the recommendations of King and shadow chancellor George Osborne, both of whom want the Bank to dominate the regulatory system.