By Simon Miller

UK Chancellor of the Exchequer George Osborne has announced a shake-up of financial regulation.

Speaking to business leaders at the World Economic Forum at Davos, Osborne formally launched a financial services bill which gives the Bank of England (BoE) day-to-day policing of the City.

He told business leaders that the shakeup overhaulled a failed system that saw banks exposed to bad loans when the financial crisis broke.

The bill also allows the chancellor to direct the BoE to step in and help a troubled bank.

Osborne said: "I am today publishing the financial services bill that will overhaul the failed system of financial regulation which allowed such dangerous levels of leverage to emerge."

He added that the failings of the system was now well understood with the tripartite system of the Treasury, BoE and the Financial Services Authority being incoherent without clear lines of accountability.

"Everyone was so focused on ticking off a regulatory checklist that nobody felt it was their responsibility to use their judgement," Osborne said.

He added: "The astonishing result was that RBS was allowed to take over ABN Amro when the credit markets had already frozen up."

The chancellor said that the new system would have clear lines of accountability and that there would be no ambiguity as to who was in charge.

He commented: "During normal times the independent Bank of England will be responsible for prudential regulation and systemic stability, accountable to parliament. But in a crisis, when taxpayers' money is at risk, both the responsibility and crucially the power to act will rest with the chancellor of the day."

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