Osborne grabs power over Bank of England

The Treasury today published the Financial Services Bill, which when passed will enshrine the new regulatory structure in law.

Unveiling the Bill at Davos, Chancellor George Osborne said it will give him the power to order the Bank of England (BoE) to act in a financial emergency.

It will also give the new Financial Conduct Authority (FCA) the power to ban products for 12 months without consultation, as announced by Martin Wheatley, the new head of the FCA, earlier this week.

The Chancellor's new power will prevent another crisis such as the Northern Rock fiasco in 2007, Osborne said.

During the 2007 crisis, Chancellor Alistair Darling found he did not have the legal authority to order the BoE to bail out Northern Rock.

Osborne also said the Bill will enshrine the government's authority to seize a struggling bank to protect financial stability.

In a wider context, the Financial Services Bill officially creates the FCA and its sister bodies the Financial Policy Committee (FPC) and the Prudential Regulatory Body (PRA), all of which will be part of the BoE. 

The new regulatory structure will replace the FSA from this year.

The Bill will amend the Bank of England Act 1998, the Financial Services and Markets Act 2000 and the Banking Act 2009.