Hector Sants to stay on as City watchdog boss

The Financial Services Authority (FSA) chief executive Hector Sants will head the new prudential regulator to be created by the coalition government.

The announcement by Chancellor George Osborne tonight, at the annual Mansion House speech, follows Sants' announcement in February that he would resign from the FSA.

Osborne used his speech to confirm that the Tripartite system of financial regulation would be dismantled, saying it had failed 'spectacularly' to identify problems in the banking sector. The Bank of England will be given new 'macro-prudential' powers to prevent systemic problems overwhelming the economy, while the prudential regulator headed by Sants will be formed as a subsidiary of the Bank to oversee individual firms.

Meanwhile the FSA's consumer protection remit will be transferred to a new Consumer Protection and Markets Authority.

Sants will remain at his post to oversee the transition to the new regime, which will take place by 2012, after which he will become deputy governor and chief executive of the new body at Osborne's behest.

Click here to read the full text of Osborne's Mansion House speech.