LONDON (Reuters) - British Prime Minister Gordon Brown attacked a proposal by the opposition Conservatives yesterday to abolish the Financial Services Authority (FSA), calling their bank regulation plan "completely unacceptable".

The Conservatives, unveiling their plan for financial market regulation if they win an election due in less than a year, said on Monday the FSA watchdog should be abolished and the Bank of England put in full charge of supervising financial institutions.

Brown accused the Conservatives of favouring an "old self-regulatory system that never worked".

"To return to something like that is completely unacceptable," he told a news conference.

"If anything the powers of the Financial Services Authority have got to be greater in the years to come," Brown said.

"The idea that we return to a system where what is the monetary authority responsible for interest rates in this country, responsible for controlling inflation ... that it should be doing the day-to-day regulation of every individual financial institution is not only potentially a conflict of interest, it is actually the wrong thing to do."

The Conservative proposals contrast with government plans to entrench the tripartite system — set up 12 years ago when Labour came to power — under which responsibility is shared between the FSA, the Bank and the Treasury.

The future of financial market regulation is set to be an issue in the campaign for the next election which the Conservatives are favourites to win.

The Conservatives say the existing system ignored problems that contributed to the credit crunch, forcing the government to spend billions bailing out some of the country's biggest banks.

But Brown said it would be "completely wrong to abolish the Financial Services Authority".

"The tripartite system is one that most countries will start to follow. The idea that it's broken is completely wrong. It's got to be made, as have all the other regulatory systems, as effective as possible for the future."

Brown said the Conservatives had never been in favour of the Labour government's decision to give independence to the Bank of England and to transfer monetary policy to the Bank.