Sir Howard to remain at FSA until 2004 as regulator's duties increase

Sir Howard Davies, the chairman of the Financial Services Authority, is to stay on as head of the world's most powerful financial regulator for another 18 months after his contract expires in July.

There has been mounting speculation that Sir Howard would choose to move into the private sector, having spent the past five years overseeing the development and implementation of a new financial regime that has collected a plethora of separate regulatory bodies into a single authority. He had also been tipped to succeed Sir Edward George, who retires as Governor of the Bank of England next year.

Sir Howard's decision to stay on was based on the recognition that the authority would benefit from continuity given that it assumed its new powers as a single regulator on 1 December. A spokesman for Sir Howard also said he was keen to prepare the FSA for its adoption of responsibility for the regulation of mortgages and general insurance, scheduled for 2004. He also wanted to see the various inquiries into the Equitable Life crisis to their conclusion.

There had been no discussion of Sir Howard staying on for another five-year term.

Gordon Brown, the Chancellor, said: "At a time when the FSA has just taken on its full regulatory power and is establishing itself as a fully independent, single regulator, it is invaluable to have Sir Howard remaining in the post."

Sir Howard's renewed tenure is likely to please many in the City, which would prefer the certainty that goes with a continuation of the status quo.

Creditors to Independent Insurance said this week they would be suing the FSA over the company's collapse.