Hector Sants said the Prudential Regulatory Authority (PRA), which he will take control of in 2012, would be more willing to allow fims to fail than its predecessor.
He said: “Where it will feel different is the fact that it has a far narrower focus and the recognition that we are not seeking to operate a ‘zero failure’ regime is now directly built into the statutory objective.”
The FSA boss said not all firms regulated by the PRA would pose a risk to its statutory objective of maintaining stable financial markets by their failure.
He also suggested the PRA would spend a far higher proportion of its budget managing the decline of firms in an efficient manner.
But he admitted “persuading society that this in an acceptable goal will be a challenge.”
Sants added the UK was unlikely to introduce additional capital requirements on big banks if international agreement could not be reached.
“We do understand the importance of large global institutions operating in London having a level playing field globally so we would not likely be superequivalent or gold plate,” he said.