In May 1997, the Labour Government took power in the UK. And with it came fast and furious sweeping changes - the establishment of the Scottish and Welsh Parliaments and momentous reforms to the House of Lords, the education sector, and last, but certainly not least, to the entire financial services industry.

The British Government announced shortly after taking office that it had decided to give the Bank of England operational independence to implement the country's monetary policy. A fortnight later, the Government announced the radical reform of the entire financial service industry's regulation structure, including the transfer of the Bank's banking supervision responsibility to the Financial Service Authority (FSA), a new regulatory body for the whole financial services industry.

The FSA is the broadest financial regulator in the world. The one-stop regulatory shop covers a wide range of industry sectors ranging from independent financial advisers operating on the high street to global investment banks.

However, the new British Government did not appear to even ponder making these drastic changes, nor did it wait for the full legislative process to be completed. With its wide margin of voting power in Parliament, most changes took place immediately, with the numerous existing regulatory bodies exchanging management agreements and 'Memoranda of Understanding' with the FSA. The FSA will have to learn as it works and legislate whilst it learns. But why the radical reforms and the undue haste?

The fact is, the whole world is changing. The Swedes and the Danes have successfully operated unified regulators for some time. The Irish and Luxembourgers are following suit. The Australians have also chosen a single prudential regulator to cover all sectors. Japan and Korea introduced similar changes last year, under the influence of the IMF.

There is one other point worth making in relation to the international dimension of financial regulation. The G7 Finance Ministers recently agreed to set up a committee to bring together regulators and central bankers around the world. Their proposal suggests that each country be represented by its finance ministry, central bank and 'leading national regulator'. The FSA fills that role neatly in the UK, but in Hong Kong and other countries, it is not as easy.

The UK's regulatory consolidation not only matches the emerging needs of the global financial marketplace, it also completes, at least in theory, the basic architecture of a single market for financial services across Europe. The set-up of the FSA followed all the relevant EU directives.

The proponents for change believe that the FSA model offers more market sensitivity for regulation, as well as enhanced effectiveness. From a market point of view, it reduces regulatory overlap and the plethora of different reporting requirements, particularly for large financial institutions. The economies of scale gained also offers further cost reduction opportunities for financial transactions, possibly creating serious international competitive advantage.

From the 'market protection' perspective, it makes increasing sense to manage the risks of complex financial institutions more comprehensively and on a global basis. The wave of financial sector mergers rolling across global markets is clearly gathering speed in North America, Switzerland, Benelux and Italy. The use of new technology, such as the Internet, has made international financial business even more mobile.

The experience of the past decade has already demonstrated embarrassing gaps in traditionally centre-based regulatory armoury. As such, international co-operation amongst regulators is a certain trend for the future.

A unified regulator also leaves no doubt as to who is responsible in the event of regulatory failure. The regime incorporates clear lines of accountability. It could also be tasked to enhance financial literacy and to improve the quality of consumers' decision making. It is also better placed to invest in long-term professional development.

The case for reform in the UK is indeed compelling. Hong Kong should be similarly motivated to find its own solution, one which is effective and quick to respond to the unpredictable market changes, both in terms of products and the technological evolution. The recent Budget has already mapped out the first step for such changes, which is to unify the exchanges. But I don't think it should, or will, stop there.

The forces resisting change will no doubt be vociferous - there are substantial vested interests involved. The sweeping powers brought about by the consolidation of regulators will also need to be properly checked and the following will all be essential: a widely representative structure for corporate governance; detailed codes of conduct for financial markets; a statutory practitioners panel; a statutory consumer panel; an independent financial ombudsman to prevent the abuse of powers; and an oversight committee in the legislature to provide an overall balance of power.

We must also ensure that consumers do not become over-dependent on regulations. Appropriate references should be made to define consumers' responsibilities in relation to different markets. The intensity of regulation must also be well balanced and sensible to prevent international businesses being pushed off-shore into less regulated jurisdictions.

The Government has no time to lose. We must study and carefully assess the changes taking place around us, engaging expert consultants if necessary. Hong Kong's accountants are also strategically placed to take a lead in these changes and it is now time to prepare ourselves.