Turner said the FPC, which will form part of the government’s troika of new regulatory institutions, could be strait-jacketed in its ability to act out its macro-prudential mandate if the EU sets maximum capital adequacy standards as well as minimum ones.
Speaking at the Mansion House last night, he said: "One thing which is crystal clear, but an area of significant concern, is that forthcoming European legislation must allow adequate flexibility for the national variation of macro-prudential tools.
"European capital adequacy regulation should enforce minimum standards across the EU, but it should leave national authorities free to ecxveed and vary them above the minimum.
"The idea that securing the single market requires the harmonisation of maximum as well as minimum standards is simply wrong and potentially harmful."
In addition to the FPC, the FSA is due to be split into the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA), although Turner acknowldeged that the parliamentary timescale means changes would not be implemented until early 2013.
He said the FPC would be the most important element within the new structure, particularly with its intended capability to address the systemic failures that led to the current financial crisis.
This mandate has been is supposed to fill the gap previously left between "a central bank too exclusively focused on inflation targeting and a micro-prudential regulator [FSA] too exclusively focused on individual institutions", he added.
The PRA will be within the Bank of England and focused on ensuring firms are financially sound and the FCA will be in charge of consumer and investor protection.
Turner said the biggest challenge for the FSA in its last 18 months would be to manage the separation of its capabilities while delivering ‘business as usual’ amid the biggest financial crisis ever.
