- Abolish the tripartite system of regulation, and transfer the FSA's responsibilities for supervising individual firms to a subsidiary of the Bank of England. The so-called Prudential Regulator – the name may change – will be chaired by the Governor.  - Create 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." The Committee, which will do for financial stability what the Monetary Policy Committee does for monetary policy, will be chaired by the Governor. It will also publish minutes of meetings and quarterly reports, and will be scrutinised by the Treasury Select Committee.  - Establish a new Consumer Protection and Markets Authority that will "regulate the conduct of every authorised financial firm providing services to consumers."  - Unite the crime-busting powers of the FSA, the Serious Fraud Office and Office of Fair Trading into a new single agency responsible for tackling serious economic crime.  The reforms represent the most profound change to Britain's system of financial regulation since Gordon Brown created the FSA in 1997.  Mervyn King, Governor of the Bank of England, who also spoke at Mansion House last night, said that he welcomed the new responsibilities he was being granted. He explained that under the new system, the Bank would be able to control a range of levers restricting bank growth, including capital requirements, depending on its view of the economic and credit cycles. While the Bank's Prudential Regulator – the core of the old FSA – will continue to set rules for individual banks, the second element involves taking an "overall perspective with a set of system-wide capital requirements that vary over the economic cycle. Judgements on the level of these capital buffers will be part of the remit of the new Financial Policy Committee."  Mr King said "The Bank will bring its own central banking culture [to the mix]. The focus of regulation needs to be on maintaining stability of the banking system as a whole. We shall be looking not just at those aspects of a bank that make it look unsafe in comparison with other institutions, but even more so at whether there are common features that threaten the stability of the system, such as the dangerously high leverage prior to 2007."  Last night Lord Turner, the chairman of the FSA, said: "The FSA now has the clarity of direction and timescale as well as the leadership that we need to meet the challenges ahead. In particular I am delighted that Hector, who has done so much to transform the FSA during the past few years, has agreed to lead the transition to the new structure."  He added: "There are important issues still to be resolved – in particular the arrangements for our Enforcement activities and for those Markets activities which relate to exchanges, clearing infrastructure and prudential issues – and we look forward to working closely with the government in considering the relative merits of different possible arrangements for these."  The Chancellor also used the speech to confirm the appointment of Sir John Vickers, the former boss of the Office of Fair Trading, as chairman of the new Independent Banking Commission.  Sir John, who was formerly chief economist at the Bank of England and a member of the MPC, is tasked with recommending, within a year, whether Britain's biggest banks should be broken up. The Chancellor announced that four other Commissioners are Sir Martin Taylor, the former chief executive of Barclays; Dr Claire Spottiswoode, the former boss of Ofgas; Martin Wolf, chief economic commentator at the Financial Times; and Bill Winters, the former London-based co-chief executive of JP Morgan who left last year.
Hector Sants, the City watchdog who quit amid proposals to abolish the    Financial Services Authority, is to stay on to affect the biggest shake-up    of financial regulation since 1997.