George Osborne accused after regulator ditches review into banking culture

George Osborne has been accused of forcing regulators to ditch a review into Britain's banking culture under pressure from the industry's biggest names.

The Chancellor is "bowing" to demands to drop the so-called "banker bashing" probe set up after the Libor rate-rigging scandal, it was claimed.

Watchdog the Financial Conduct Authority (FCA) has announced it will instead "engage individually with firms to encourage their delivery of cultural change".

The decision comes after FCA chief executive Martin Wheatley announced in July his decision to quit the post as Mr Osborne refused to renew his contract, which was due to end in March next year.

MPs suggested the Chancellor was behind the decision to drop the review months after it was set up.

Labour's John Mann, who sits on the Treasury select committee, said: "George Osborne is behind it, without any question.

"The cultural issues are what lays at the heart of the financial crisis. It's fundamental. Individuals took irrational risks with other people's money.

"This decision leaves us hugely exposed into the future because it allows the banks to continue to act as they acted before."

He added: "George Osborne is bowing to pressure from the banks. HSBC and Barclays have threatened to leave the country, that is what they are privately threatening."

Conservative Mark Garnier, who also sits on the committee, said he was "disappointed" by the decision.

He told BBC Radio 4's Today programme: "There has always been this great argument that perhaps the Treasury is having more influence over the regulator than perhaps it ought to and certainly, if I was looking for a Machiavellian plot behind what's happened here and the tone of the regulator, then I suppose I would start looking at the Treasury."

A number of banks have already signalled that changes are being made to their operations.

In November, Standard Chartered said it would cut around 15,000 jobs worldwide as part of a major overhaul, although it has not disclosed how many of its 2,000 UK-based staff would be made redundant.

But the bank said it had no plans to move its headquarters from the UK, given the scale of the restructuring task.

In contrast, HSBC said it was investigating whether to close its UK HQ in the City, where it has been based for more than two decades.

The Government's attitude to financial services companies is among the factors involved in deciding whether to remain in London, said the banking giant - formerly known as Midland. A decision is expected in the new year.

Earlier this year, the FCA told banks to sharpen up their efforts to learn lessons from scandals such as foreign exchange and Libor rate-rigging, which have already cost them billions of pounds in fines.

The body said companies' progress in making improvements as part of the review - designed to examine and compare behaviour within the banking sector, including staff pay and complaints procedures - was initially disappointing and improvements "had been uneven" across the industry.

They also often lacked the urgency required given the severity of recent failings, the watchdog said.

But it also said "some progress had been made on improving oversight and controls and benchmarks" following the scandals involving the benchmark rates in Libor - the interbank lending rate - as well as in foreign exchange and gold markets.

In a statement the FCA said: "A focus on the culture in financial services firms remains a priority for the FCA.

"There is currently extensive ongoing work in this area within firms and externally.

"We have decided that the best way to support these efforts is to engage individually with firms to encourage their delivery of cultural change as well as supporting the other initiatives outside the FCA."