On 16 July 2010, the Chancellor of the Exchequer, George Osborne MP, announced fundamental changes to the UK regulatory system in his annual speech at Mansion House, London.

The Chancellor has long doubted the UK's tripartite system and in his speech attacked it by stating that at the "heart of the crisis was a rapid and unsustainable increase in debt that our macro-economic and regulatory system utterly failed to identify let alone prevent."

The Chancellor confirmed that the Government will now abolish the tripartite regime, and that the FSA would cease to exist in its current form. In its place would be a form of "twin peaks" regulation involving:

The Chancellor also announced that the Government would create a single agency to take on the work of tackling serious economic crime (for instance market abuse) that is currently carried out by a number of Government agencies (including the Enforcement Division of the FSA).

The Government would also introduce a banking levy and "demand further restraint on pay and bonuses".

The issue of separating retail and investment banking is also under consideration. The Government has established an independent commission to report on the issue by September 2011. This commission will look at the structure of banking in the UK, the state of competition in the industry and how customers and taxpayers can be sure of the best deal. Whether the Government has already made up its mind is open to question as the Chancellor stated that: "The Commission will come to a view. And the Government will decide on the right course of action."

The Government intends to complete the changes to the regulatory regime by 2012 and it is clear that many of the details still need to be worked out. At the start of his Mansion House speech the Chancellor quoted one of Winston Churchill's most famous lines: "Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning." This is also true for firms in the sense that they now know for certain that regulatory change is coming and that they need to keep an eye on developments.

In its statement, Understanding employer support for DB schemes, the Regulator outlines its expectations of final salary (DB) pension scheme trustees in terms of their responsibility to examine and monitor the 'employer covenant', which is the sponsoring employer's legal obligation to fund such a scheme.

The Regulator expects trustees to:

The Regulator has produced for consultation new and revised related guidance, which highlights issues on:

From the June 2010 statement, it is clear that the Regulator expects trustees and employers to have a fall-back plan for realising employer support if required. This may have implications for an employer's creditworthiness, and may be something a lender would take into account in pricing a loan transaction.

The new guidance for trustees is to be welcomed.

Despite considerable efforts to reach agreement to introduce an international banking tax, or at least a European one, the UK, France and Germany have issued a joint statement announcing that each of them will unilaterally introduce a banking levy. To date only details of the UK tax have been published. The French and German taxes may differ from the UK proposal.

The UK tax will apply to banks, including the UK operations of non-UK banks, which have "relevant liabilities" on their balance sheets of at least GB£20 billion.

"Relevant liabilities" means:

Key details of the UK levy are:

As a result of the statement issued by the UK, France and Germany, the European Commission's proposals for a Europe-wide bank tax appear to become redundant. This could be viewed as a victory for the UK, as the Government opposed the Commission's proposals on the basis that the Commission wished to prevent the UK Government from spending the money raised by the levy as it wished. Rather, the Commission wanted the money raised to be paid into a resolution fund.

The British, French and German statement also indicated that the three Governments still hope that agreement can be reached for an international banking levy. Given that the concept of such a tax is opposed by many countries which did not bail out their own banks, such as Canada, China, India and Brazil, it is difficult to see how this might occur in the foreseeable future. If this is right, countries which support a bank tax may be forced to follow the example of the UK and introduce their own levies.