The Centre for Policy Studies, a private UK think tank, has launched a blistering attack on the Financial Services Authority, the markets regulator, accusing it in a 78-page open letter of having lost the respect and support of the financial community.

The CPS, set up 30 years ago by former UK prime minister Margaret Thatcher, said the FSA was "vulnerable to political direction and influence" and an "increasingly defensive and risk averse organisation" that is undermining competition with heavy-handed rules.