RIP the FSA – and welcome the PRA, the FPC and the FCA. As if the City of London's regulatory regime weren't complicated enough, a new set of acronyms is now in place to oversee the financial services sector following the dismemberment of the Financial Services Authority on April 1st.

It is the biggest overhaul of City regulation since 1997, when, in a political masterstroke, Labour chancellor Gordon Brown granted the Bank of England its independence over monetary policy, but removed its regulatory powers.

A decade and a half later, that regime has been comprehensively dismantled – and the Bank of England has become one of the most powerful central banks in the world.

The much-criticised FSA is being replaced by two bodies: the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA).

The PRA, which operates as part of the Bank of England, will oversee Britain’s 1,700 banks, building societies, insurers and investment firms.

The FCA, which is not under the central bank's umbrella, will police the City of London, clamping down on unethical and illegal practices, fining wrongdoers and protecting consumers.

Then there is a third body – the Financial Policy Committee (FPC) – which has been operating on an interim basis for the past two years but formally came to life this week.

Headed by Bank of England governor Sir Mervyn King, the FPC is part of the central bank and will oversee the other regulators in pursuit of its main task – the early warning and prevention of another financial crisis, something the FSA so spectacularly failed to do.

The PRA was quick off the mark yesterday when it moved to protect the 15,000 account holders at Laiki Bank in the UK against the Cypriot savings levy. Their £270 million (€318 million) in deposits have been transferred to the UK arm of the Bank of Cyprus, which is incorporated in the UK, rather than operating as a branch as Laiki does, thus taking the cash out of reach of the Cypriot authorities.

The Laiki move came as the PRA was formally opened by British chancellor George Osborne, who hailed the watchdog’s first intervention: “In your very first day in existence, you sorted out a banking problem without having to come to me and ask for British taxpayers’ money. And long may that continue.”

As the chancellor well knows, life for the PRA and the other new regulatory bodies will rarely be that easy. The departure from the FSA’s “light-touch” regime has not pleased everyone in the City and there are serious concerns that the central bank has been handed too much power.

A number of leading figures, including former members of the bank’s monetary policy committee, have raised concerns of the crucial role in financial regulation now being played by unelected technocrats on Threadneedle Street.

At the moment, that power lies largely in the hands of King, but in three months it will pass to his Canadian successor, Mark Carney, hand-picked for the task by Osborne.

Ethics test
Another new system has been imposed on the City of London this week. From now on, would-be masters of the universe will be forced to take – and pass – a test on ethics before they can sit their exams.

The Chartered Institute for Securities and Investment (CISI), the finance industry’s main professional body, says its compulsory “IntegrityMatters” test is designed to ensure entrants to the capital markets sector appreciate the importance of integrity.

To hammer this home, CISI is planning an advertising blitz, including in tube stations at Bank and Canary Wharf and, for some reason, Westminster (perhaps MPs could benefit from a similar test?). As well as raising the consciousness of market participants, CISI hopes it will help reassure the public that banks and other financial organisations really are changing their culture.

The online integrity test poses six ethical dilemmas, all based on real-life examples. One scenario involves a junior broker who forges a signature on an urgent sales order because her boss is having a long session at the pub. The ethical thing to do, of course, is to report both forger and boss.

It is easy to take the moral high ground when sitting in front of your computer with imaginary problems – as underlined by the fact that more than 90 per cent of those who took the test voluntarily last year earned A grades.

But will they make the same ethical choices in real life?

Fiona Walsh writes for the Guardian newspaper in London