Two Bank of England directors have been earmarked to take control of transferring banking supervision from the Financial Services Authority to the central bank if the Tories win the election.
Paul Tucker, a deputy governor of the Bank, and Andrew Bailey, executive director of special operations in the banking sector, are the two bankers who the Conservatives believe are best equipped to deal with the interim period ahead of the proposed break-up of FSA. Early talks have taken place between them and the Tory treasury team, led by the shadow Chancellor, George Osborne, but it has not yet been decided which of the two would take prime responsibility.
Plans to dismantle the FSA, widely criticised for its "light-touch" regulation for not catching many of the funding problems leading to the collapse of Royal Bank of Scotland, Northern Rock and HBOS, are at the heart of Tory policy to sharpen up City and banking regulation. The plans involved abandoning Labour's tripartite system of regulation by returning oversight of banking to the Bank while creating a new consumer watchdog to deal with mortgages, insurance products and other financial issues such as advice.
One senior Tory source said: "If we win the election, we will want to move ahead, as fast as we can with the break-up of the FSA. Our plan needs primary legislation, which will take time, but in the interim period we will need top directors at the Bank to take operational control to start work on what parts of the FSA need to go where."
The proposed break-up has prompted criticism not just from the City but the FSA itself, including the out-going chief executive, Hector Sants, who warned that the policy undermined its attempt to beef up its supervisory powers and push for regulatory reform in the rest of the world. Sants is stepping down in July but sources insist this was unrelated to Tory plans.
Mr Tucker, who is a markets expert and former corporate financier, heads up financial stability at the bank and is also on the board of the FSA. He has been one of the most outspoken central bankers on the need for tougher capital requirements and other measures designed to make it harder for banks to build up risk on their balance sheets. Mr Bailey works more closely with the banking system itself, and has responsibility for the UK's payment systems – Chaps and Crest – and has run the Bank's Special Resolution Unit since 2007. He also looks after the Dunfermline Building Society and heads the so-called London Approach, the process by which the Bank uses its power to help companies refinance. A Bank spokeswoman had no comment to make on Tory plans.