MPs say financial regulation reforms should not be rushed

Plans to overhaul UK financial regulation are in danger of being rushed in before they are properly thought through, MPs warned today.

The UK government plans to end the "tripartite" system introduced by Gordon Brown, in which the Financial Services Authority (FSA), the Bank of England and the Treasury share responsibility for regulating the City and the economy in the wake of the financial crisis. Instead, it has drafted plans to create a "twin peaks" system, which involves scrapping the FSA and making the Bank a "super-regulator", giving it additional responsibilities for overseeing financial stability and the health of companies.

The UK government aims to have legislation in place in mid-2011 and the new system completed by 2012.

But the Treasury select committee warned it should not be rushed in to meet an "ambitious timetable" and said that more time may be needed to take in any recommendations made by the Independent Commission on Banking.

Committee chairman Andrew Tyrie said: "In light of the banking crisis, the UK government is rightly proposing radical changes to the way in which financial services are regulated.

"However, having examined the initial proposals, the committee's overriding concern is about the proposed speed of implementation. It is vital to maintain the momentum for reform, but there is no point in flawed change."

Financial services minister Mark Hoban yesterday told the committee that the sale of the taxpayers' stakes in the banks that were bailed out during the credit crisis must reach a balance between "promoting competition and getting a good price".

He added: "There will be a trade off."

The coalition government plans to sell Northern Rock as well as its stakes in Edinburgh-based Royal Bank of Scotland and Lloyds Banking Group.