Undoing the regulatory system put up by Gordon Brown in 1997, U.K. Chancellor of the Exchequer, George Osborne plans to eliminate the Financial Services Authority and give most of its supremacy to the Bank of England.

The watchdog would be gashed down and swapped by three bodies during the next two years, and the Legislation to reinstate the FSA, will be in place by 2012.

To act as an auxiliary of the central bank, a Prudential Regulatory Authority will be created. A Financial Policy Committee will also be created at the bank, along with a consumer protection and markets agency.

Osborne, whose Conformist Party took power after the May 6 election, is convening to a promise made almost a year ago to wobble up the way the U.K. banks and markets are policed. Former Prime Minister, Gordon Brown's Government was made to nationalize Northern Rock Plc and take calculating stakes in the Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc.

New roles would be taken up by the FSA's Chief Executive Officer, Hector Sants, 54, by becoming a deputy Governor of the central bank.

The lawyers, however, say that that is plan will not change the regulation of these banks, as the European Union presumes a larger role. The EU plans a refurbishment of financial regulation that would see the creation of three pan-European regulators for banks, securities and insurance.