Davies, 46, grew up in Manchester. As a grammar school boy destined for Oxford and a glittering career, he became fanatically faithful to his home city's second football club - the only loser he has ever backed.
His support for City is now as much a part of his public persona as his reputation for having a big brain and versatile mandarin career - he has been personal assistant to the ambassador to France when in his twenties at the Foreign Office, adviser to Nigel Lawson while at the Treasury, head of the CBI and deputy governor of the Bank of England.
To get under the skin of the man, however - to understand what sort of job he is likely to do now that, as the City's top cop, he has his year- old organisation up and running - you have to hear his response to the stories others tell about him. "Everyone knows I support Man City," he says. "But the fact is I support two teams. My family has a place near Banbury. At weekends my sons and I go to watch the local side, the Banbury Puritans - Banbury was a Puritan stronghold. My wife calls me a puritan, and I must say, I find it satisfying to shout: 'Go-o-o, you Puritans!'"
Swindlers, cheats, fraudsters and other City miscreants, watch out. Davies is that most dangerous of all puritans, the witty, worldly kind. He's unshocked by BCCI, Lloyds, Barlow Clowes, Barings and pension mis-selling, but determined that the rash of scandals overrunning the fag-end of the Thatcher era won't happen on his watch.
Davies's witty puritanism makes it easy for him to understand, and even take a certain pleasure in, the fact that the Robert Maxwell scandal bears an uncanny resemblance to the great financial scandal of the Victorian era. On 17 February 1856 the body of John Sadleir, MP for Carlow, Junior Lord of the Treasury, Chairman of the Royal Swedish Railway Company, and model for Mr Merdle in Dickens's Little Dorrit, was found on Hampstead Heath. The man had done away with himself in circumstances as murky as those surrounding Maxwell's demise after leaving the deck of The Lady Ghislaine off the Canaries. And, just as the full extent of Maxwell's defalcations emerged only after his death, so did Sadleir's: the rogue had sold pounds 150,000 of false shares in Royal Swedish.
Davies's urbane puritanism dovetails nicely with the heavier, Scottish puritanism of Chancellor Gordon Brown. Both men believe that if the country is to stop mouthing phrases about smoothing out the boom-bust cycle and do something about it, a prolonged period of undeviating financial probity is imperative. Both believe that a component of this probity must be a new start on City regulation.
The legacy Davies has been landed with is less than sterling. For the duration of empire the City was led by gents whose word, as the cliche goes, was as good as a bond - except in instances like the Sadleir affair. From the 1960s to the mid-1980s, as empire faded, the City changed from imperial financial capital into the capital of the emergent global financial system.
The tax evasion money on which the eurobond market was built may have come from Belgian dentists, but the dollars used by those dentists were put on deposit in London banks by American transnational companies seeking to minimise their own taxes. And those dollars were tapped in offshore bond deals by fledgling eurobond houses like Siegmund Warburg's anti-establishment creation.
Then when Margaret Thatcher assigned Cecil Parkinson to modernise the City - to keep it competitive as a financial centre with Wall Street and Tokyo, as well as Zurich and the Cayman Islands - an alphabet soup of self-regulatory organisations was created: the SIB, Imro, the PIA, the SFA. These not only remained mysterious to all but a tiny cognoscenti, but were also a spectacular flop. Davies puts it a bit more diplomatically: "It took a while for the men running these organisations to understand there were people who were not playing by the rules," he says.
In fact, the City came perilously close to losing its reputation. At home, the public increasingly equated investing with entrusting its savings to scalpers. International banks began to view the City more like the Caymans and less like Wall Street, policed by the Securities and Exchange Commission set up in the wake of America's 1920s stock market scandals.
"There is no question that City regulation needed rebranding," Davies says, reverting to New Labour-speak with the same kind of linguistic flexibility he displays when he uses fluent management consultancy-speak (from his days at McKinsey's) to talk to private sector tyros.
Davies has a 2,000-strong staff brought together through the amalgamation of the staff of the Bank of England's bank supervisory division, stock and bond market self-regulators and Lloyd's of London's overseers.
Under old legislation not used by his predecessors, Davies will demand personal accountability from everyone in the City: especially, he says, referring deliberately to the Barings scandal, from senior management. Under new legislation he will have power to levy unlimited fines on wrongdoers.
Davies believes the public likes the new broom in the City's police force. The BBC polled the public six weeks ago, he says. It found half the sample said the new regulatory regime had made no difference ("Quite right," Davies says: "We haven't begun yet.") But 37 per cent said the new regime had made it safer to invest. Only 7 per cent said it made it less safe to invest.
"Under the old system, the PIA has made a start on pensions mis-selling," Davies said. "They've dealt with the priority cases - retired people and people close to retirement. I had the Pru in," he adds. "Under the old system they were outside the regulatory apparatus. I said this was simply not on, and they voluntarily put themselves in."
Still, Davies thinks the FSA will do better than the PIA: "We still have a long way to go. There are 1.5 million cases [of pensions possibly sold under false pretext] that need to be investigated."
For all his tough talk, however, Davies shies away from echoing the gunslinger vernacular of America's financial cops - the enforcers at the SEC. He even evinces a faint distaste for the American system of competing elites under which hot young lawyers cut their teeth at the SEC - putting as many bankers behind bars as possible - then, having demonstrated their testosterone, go to work on Wall Street, where their main business is outwitting their former employer.
Davies plans a less adversarial approach to his City charges. "We believe there's a collectivity of market interest," he says. "We think we can set up a regulatory framework in which people who want to do business with each other more than once can start by regulating themselves. There will," he goes on, "be exceptions, like Barlow Clowes."
Davies is equally sanguine about meshing the need for tighter regulation in the City with promoting London as a financial centre. He argues that in an age of endemic money-laundering and international financial fraud, stricter regulation can be a selling point for the City.
However, what he will do if this proves to be casuistry - if his agenda for tighter City regulation and the interests of the City's most powerful international banks clash - is not clear. It could prove the acid test.
In an hour-long interview last week Davies gave the impression of carefully choosing his words only once. When asked if his treatment of Goldman Sachs in its capacity as an adviser to the fraud-riddled Maxwell financial empire would have been different from the treatment meted out to the US firm before the FSA came into existence, he deflected the question by saying that he did not know enough about the case. But the message was clear: the power of the City's big international firms will test both his puritanism and his big brain to the full.Reuse content