However, it will also be a tough week for the banks as a major new report calls for an urgent shake-up of the sector, including stopping commissions to front-line staff.
Osborne will say in his Mansion House speech that although the FSA will retain powers over individual banks and other finance sector organisations, the BoE will have lead authority, according to reports.
Treasury sources say the move echoed similar developments to increase the power of central banks in America and France.
Business secretary Vince Cable has also given the clearest indication yet Britain’s leading banks are going to be broken up.
He said there was an obvious “direction of travel” towards separating retail and investment banking and the UK could act unilaterally if there was no global agreement.
His comments come as a major report by the Future of Banking Commission calls for a ‘profound reform’ of the sector, including a break-up of some institutions.
Changes would include ensuring an “ethical culture” which would see banks stop paying commissions to front-line staff.
The report says remuneration practices within banks have been a “key source of concern” and senior executives should only be rewarded for long-term business performance and shareholder return.
“To tackle mis-selling and the sales-based culture disliked by customers and branch staff alike, banks should cease rewarding frontline staff for increasing sales. Instead they should receive bonuses linked to levels of customer satisfaction, the fair treatment of customers, and resolution of complaints” the report says.
However, it accepts its proposals will require a “new culture” for the banking system: “To bolster this cultural change we want to see bankers engage in the same sort of professional standards training undertaken in other professions, with the same remedies and sanctions applied where individuals fail in their duty of care.”
Its proposals also focus on providing risk-free “safe haven” accounts, guaranteed by the Government, which would only be invested in safe assets. In return for guaranteed protection, investors would receive low returns.
The commission wants the current FSCS commitment to protect the first £50,000 to apply to each brand rather than each licensed institution, as it believes this would give savers greater protection.
Other recommendations include “living wills” detailing how the collapse of a bank would be managed and how customers would be treated.
The commission was set up by consumer group Which? last December and gathered evidence from regulators, consumer groups and business leaders including Bank of England governor Mervyn King, FSA chairman Lord Turner and Vince Cable.
Its recommendations will be delivered to 11 Downing Street, with the aim of helping shape the Government’s policy on financial reform.
