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Chancellor George Osborne has revealed how the banking reforms outlined in the new Financial Services Bill could change the way the financial sector is currently regulated, the BBC reports.

The bill is set to give the Chancellor the power to reject decisions made by the Bank of England when dealing with bank bailouts and other interventions for failing banks. It's hoped that the overhaul of current banking regulation could help prevent another Northern Rock-type collapse.

The Financial Services Bill will replace the 'tripartite structure', made up of the Financial Services Authority (FSA), the Bank of England and the Treasury. The system was introduced by the previous government, but Mr Osborne criticised it for being 'incoherent' and lacking 'clear lines of accountability'.

As part of the changes, the FSA will be scrapped, and three new bodies - two of which will be within the Bank of England - will be created to regulate financial services:

  • The Financial Policy Committee (FPC), which will be given overall responsibility for financial regulation, and will monitor the risks of the financial sector to the economy. It will also oversee two new financial watchdogs.
  • The Prudential Regulation Authority (PRA), which will have responsibility for looking after the 'safety and soundness' of individual financial companies.
  • The Financial Conduct Authority (FCA), which will have the task of protecting consumers and ensuring financial sector workers follow rules and regulations.

The Chancellor, in a speech at the World Economic Forum (WEF), said: "The Financial Services Bill will overhaul the failed system of financial regulation which allowed such dangerous levels of leverage to emerge." 

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