(For other news from the Reuters Global Financial Regulation Summit, click on http://www.reuters.com/summit/GlobalFinancialRegulation09?PID=500)
LONDON, April 27 (Reuters) - A former senior British financial regulator said a "twin peaks" model with two bodies -- one to ensure stability of financial markets, the other to check business practices -- could replace Britain's existing system.
Since 1997, supervision of the banking industry in Britain has been split between the central bank, the Financial Services Authority (FSA) and the Treasury under a so-called tripartite structure.
But it failed to spot excessive risk that contributed to the worst global financial crisis in more than 80 years and forced the British government to spend billions of pounds to shore up several banks. "I am very disappointed with how the tripartite arrangement has worked ... No regulator can wash their hands and say 'that's not down to me'," Michael Foot, who was a managing director at the FSA in charge of major firms until his retirement in 2004, told the Reuters Global Regulation Summit on Monday.
"The FSA needs reform ... The only thing I can think we could do that would make any remote sense would be to have a twin peaks model ... I have always said it is an option," he added.
Such a system is already in place in the Netherlands and Australia.
A report commissioned for Britain's Conservative Party, which polls predict will form the next government after elections due in summer 2010 at the latest, recommended a "twin peaks" approach to UK supervision.
Foot added that the central bank, the political authorities and the financial regulator must continue to work together, whatever the architecture the authorities choose.
Earlier this month, the G20 leaders adopted a broad framework for regulatory reform and repairing the financial system.
One of the priorities now is to identify which systemic firms need to be monitored and how to monitor them in an effective way, Foot said. (For summit blog: http://blogs.reuters.com/summits/) (For more on the Reuters Global Financial Regulation Summit, see (Reporting by Olesya Dmitracova; Editing by Jon Loades-Carter)