Pictured above: Charles Arrand

The Government's financial regulation reforms represent the most significant changes for a decade, according to a Midlands expert.

Charles Arrand, a partner in the Birmingham office of international legal practice DLA Piper, welcomed the new administration making clear its intentions.

The Financial Services Authority is being abolished along with the so-called tripartite system of regulation.

The FSA's responsibilities for supervising banks and other substantial financial institutions are transferred to a subsidiary of the Bank of England, the so-called Prudential Regulator.

An independent Financial Policy Committee at the Bank with "the tools and the responsibility to look across the economy at the macro issues that may threaten economic and financial stability and the tools to take effective action in response" is being established.

A new Consumer Protection and Markets Authority will "regulate the conduct of every authorised financial firm providing services to consumers".

And the crime-busting powers of the FSA, the Serious Fraud Office and Office of Fair Trading will be united into an Economic Crime Agency responsible for tackling serious economic crime.

Mr Arrand said: "All of this is consistent with Tory policy and manifesto commitments prior to the election but the rumour mill, prior to this announcement had, at first, suggested that the FSA would survive and the ambitious Conservative agenda would be slimmed down.

"The proposed changes will require legislation and are likely to lead to the most substantial financial services regulatory legislation since the Financial Services and Markets Act 2000."

In addition a Banking Commission has been created, with Sir John Vickers as chairman, to consider a break-up of the banks. 

Mr Arrand noted: "The make up of the five-strong Commission is mostly of people who have been critical of the banks during the current financial crisis."

He continued: "In such a crisis there are really only two institutions in the public domain who can act to stem the panic: the finance ministry and the central bank. This is because stemming the crisis depends principally on the judicious pumping of money and other forms of support into the system - both at the macro-economic level and to save individual institutions. The only public players who have this money are the central banks and the taxpayer.

"Consequently giving the Bank of England additional powers with regard to financial stability makes sense.

"As to the Economic Crime Agency, the UK has had a perennial problem with finding the best way to tackle financial crime and certainly many would argue that there are too many overlapping agencies. But the jury is out as to whether this latest rearrangement will deliver any more successfully than its predecessors."

Mr Arrand said the Consumer Protection and Markets Agency reflected a model embraced by a range of other countries including Australia, the Netherlands and France.

He went on: "One would expect that this agency would have an even more heavily 'retail' character than the FSA and one of the main concerns here is the fact that responsibility for the wholesale markets - and presumably supervision of exchanges - appears to be assigned to this agency. This is likely, overall, to result in a much more intrusive regulatory intervention in the UK's international professional markets."

But it was in line with both the European trend and legislation currently going through the US Congress. 

Meanwhile there was a question mark over the Prudential Regulator reporting to the Bank of England.

"It appears that this will be what is left of the FSA after everything else is taken away and will involve the existing FSA supervision teams focused on banks, investment banks and, probably, major insurers coming under the aegis of the Bank of England," said Mr Arrand.

But would it actually be a division of the Bank?

And further down the line would be issues such as plea bargains and immunity for whistleblowers.

Mr Arrand added: "The legal profession will be looking very closely at any proposals which come forward particularly in relation to plea bargains, which has been a cause of much recent controversy and interest."