Tories moot plan to dissolve FSA

The Financial Services Authority (FSA), the main city regulator that oversees investors' interests, needs "a major internal reorganisation to put prudential regulation at the heart of the organisation" says Sir James Sassoon, a former treasury adviser to Gordon Brown.

The commission, headed by Sir James, was formed at the initiative of Tory shadow chancellor George Osborne to review the tripartite structure, which includes the Bank of England, the FSA and the Treasury.

The FSA has been blamed for failing to stop the UK banking crisis.

Osborne published the report by Sir James ahead of FSA chairman Lord Turner unveiling his own plans, expected next week, to improve the financial watchdog.

Since 1997, oversight of the financial sector has been divided between the Treasury, FSA and Bank of England.

Sir James opined that the FSA should go and the Bank of England should take on responsibility for macro-prudential issues.