Abolish the FSA!

By Felix Salmon
July 20, 2009

There should be as few financial regulators as possible, and they should be as powerful as possible. So this is a good idea, I think:

Conservative leader David Cameron will abolish the Financial Services Authority and give its powers to the Bank of England if his party wins the next general election.

The beefed up central bank would monitor the health of the financial system, setting capital requirements and leverage limits, and police individual lenders. A Financial Policy Committee would be established with the same stature as the bank’s existing interest rate-setting Monetary Policy Committee.

Having strong regulators is obviously not a sufficient condition for preventing financial crises, but it is a necessary condition. Everybody thought that the FSA was a strong “super-regulator”, of course. But further consolidation can’t hurt.

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