The Bank of England is to become one of the world's most powerful central banks as the biggest overhaul of financial regulation for 16 years takes effect.
Sweeping changes are undoing the system set up by former Prime Minister Gordon Brown when he was Chancellor in 1997.
The Financial Services Authority (FSA) is being replaced by three new bodies - the Financial Policy Committee (FPC), the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA).
The new system comes instead of the so-called Tripartite structure of the FSA, Treasury and Bank of England, which was blamed for being "asleep at the wheel" during the 2008 financial crisis.
George Osborne hopes the new system will fix financial regulation With both the FPC and the PRA sitting within the BoE, it will take on vast new powers and responsibility not just for regulating lenders, but also spotting and preventing possible financial shocks.
It marks a return of regulatory powers to the central bank, which were taken away from it on gaining independence in 1997.
Chancellor George Osborne is hoping the shake-up will plug the gap that previously existed in the Tripartite system, with no one taking responsibility for monitoring risks to the financial system as a whole, such as the lending boom.
He has previously criticised the structure for being "incoherent" and "without clear lines of accountability".
This perceived lack of oversight was blamed for excessive lending that sparked a sub-prime mortgage crisis and in turn the credit crunch and banking meltdown.
The system brought in by ex-PM Gordon Brown will be swept away The changes also hope to address the FSA's self-proclaimed "light touch" regulation, which saw the watchdog fail to rein in the banks.
It has since admitted mistakes were made in the run up to the collapse of Northern Rock, while it appeared woefully inept in preventing the banking scandals that have emerged in recent years - such as the Libor interbank rate-rigging affair and the mis-selling of payment protection insurance (PPI).
As the pillar of the incoming regime, the FPC will take the broadest overview of financial regulation.
The PRA will ensure banks and insurers have enough capital and liquidity, while the FCA will protect consumers by promoting effective competition and regulating all financial services firms.
PRA chief Andrew Bailey has already promised a more intrusive approach to regulation of the 1,700 financial institutions under his remit.
Incoming bank chief Mark Carney recently outlined his thinking for MPs His counterpart at the FCA, Martin Wheatley, has also pledged to clean up the sector with new powers to suspend or ban products and issue fines.
But there are concerns the BoE will become too powerful, given that it also has responsibility for monetary policy in the UK.
In a stark warning, the former head of Germany's central bank said recently it risked impacting its independence.
Ex-Bundesbank boss Axel Weber, who currently chairs Swiss group UBS, said he "flatly refused" taking on a regulatory remit when he was head of the bank due to concerns over independence.
The man wielding the BoE's new powers will soon be Mark Carney, who is currently Canada's top central banker. He takes over from governor Sir Mervyn King in July.
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