The UK Financial Services Authority is suffering from a "lack of clarity" over its current mandate, according to the International Monetary Fund.
In new papers released on Wednesday, accompanying the body's country review published earlier this week, the IMF warns of market regulation and supervision becoming "diluted".
It suggests uncertainty over its mandate risks being carried forward to the Financial Conduct Authority, one of the successor agencies to be set up when the FSA is disbanded.
"The new Financial Conduct Authority, with its broad remit, is subject to some of the lack of clarity present in the current mandate of the FSA," one technical paper notes.
"Ways should be found - such as greater clarity in how the remit of the various parts of the FCA are expressed or the internal senior management structure within the FCA - to ensure that market regulation and supervision, and prudential supervision of FCA firms, do not become diluted."
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