The FSA's replacement - the Financial Conduct Authority - should be scrapped and the Financial Ombudsman Service given the role of consumer protector, says a leading economic think-tank.
'Simple Rules for Complex Systems: Streamlining the UK's Financial Regulation Regime' was written by Tim Ambler and Eamonn Butler from the Adam Smith Institute.
In the report they brand the FCA, the successor of the Financial Services Authority in tandem with the Prudential Regulatory Authority, as "unnecessary" and say it is a mistake to have two regulators.
The FCA will be responsible for increasing confidence in the financial services system through consumer protection while the PRA will enhance financial stability.

The report states: "It is a mistake to have two regulators, second-guessing each other. They intend to be continuously monitoring financial firms, rather than just setting broad rules and punishing transgressions, which will increase the volume and cost of regulation in the sector.
"A better model for consumer protection is the Financial Ombudsman Service which sets broad rules and deals with hundreds of thousands of complaints on a staff of just 1,000. The FOS could protect consumers well, without the need for a further regulator in the form of the FCA."
The report said that it would be hard to measure the performance of the FCA and that it would be hard to train staff in sufficient detail in such little time.
The report summarised by saying: "In short, the FCA is not only unnecessary, its interventions are likely to be pernicious as it tries to compete with other regulators and to second-guess the traders."