Osborne also said chief executives of the FCA would be subject to a fixed, renewable, five-year term although this would only apply for the successors of Andrew Bailey, who takes over as CEO in July.

Osborne made the comments in a letter sent to the head of the Treasury Select Committee (TSC) in Britain's parliament, which reviews monetary and financial policy.

Some of the lawmakers on the committee have expressed concern that the FCA was being politicised after Osborne ousted its first chief executive, Martin Wheatley, last year by refusing to renew his contract.

Wheatley was a hardliner in regulatory terms and Osborne wanted a "new settlement" with banks, widely interpreted as seeking a more accommodative stance with the sector.

In future the TSC would make a recommendation to parliament on the person put forward by the finance ministry to head the FCA.

"Parliament will now be better placed to safeguard the FCA from interference - or the perception of interference - by the Treasury or Treasury ministers," the TSC's chairman, Andrew Tyrie, said in a statement on Tuesday.

Wheatley was replaced by acting CEO Tracey McDermott, who announced last week she would also be leaving the watchdog once Bailey takes over in July.

"Giving the committee a veto over hiring and firing the FCA chief executive will achieve little in advancing the regulator’s objectives," said Simon Morris, a financial services partner with law firm CMS.

"Needing committee approval will merely politicise the appointment, requiring the candidate to field grandstanding questions with crowd-pleasing sound bites," Morris said.

Efforts by some lawmakers to give parliament veto powers over appointing the head of the Prudential Regulation Authority, the Bank of England's banking supervisory arm, had not mustered enough support.

(Reporting by William Schomberg and Huw Jones, editing by David Milliken and Susan Fenton)

By Huw Jones

Stocks treated in this article : Banco Santander, S.A., Barclays PLC