The FSA will eventually become a super regulator, taking on the work of other regulatory bodies including the Securities and Futures Authority and the Personal Investment Authority.

It will also oversee insurance firms, building societies and friendly societies.

Howard Davies: Job to restore confidence

The FSA comes under the supervision of former CBI boss and deputy governor of the Bank of England, Howard Davies.

It will be his job to restore confidence in the UK's financial institutions following the collapse of Barings and BCCI and the pensions mis-selling scandal.

But not all financial products will be within the jurisdiction of the new regulator.

Several major financial products such as mortgages fall outside the FSA's jurisdiction. These are only covered by a code of practice drawn up by mortgage lenders.

Marcus Sephton of KPMG: The move is a unique experiment

General insurance products such as home and car insurance are also exempt and not covered by the regulator.

Consumer groups believe the FSA is too City-orientated. They want the rule of the FSA to shift from regulating companies to covering the products they sell and question where the consumer will figure in the FSA's list of priorities.

Plans 'on track'

The Chief Secretary to the Treasury, Alistair Darling, said the government's plans to bring in a single regulator for the financial services industry by the year 2000 were "on track."

Speaking at the Financial Services Authority's European Conference in London, he said a broad framework had been agreed on new legislation for financial services to create a reformed system that would last.

Mr Darling said: "The next stage is the new Financial Services legislation which we will publish in draft in the summer, " he said.

He said the case for a single regulator was clear.

"A single regulator will be more effective because there will be no duplication of effort and no doubt about which body is responsible."

He said consumers would benefit as they would only have to go to one body to make an enquiry or complaint.