Wheatley, cropped

“BRITAIN needs a tough, strong financial-conduct regulator,” said George Osborne, the chancellor of the exchequer, on July 17th as he announced that he had effectively ousted Martin Wheatley, the City’s tough, strong financial-conduct regulator. Financiers quietly toasted the departure of the figure they had come to see as Britain’s bank-basher-in-chief since his appointment in 2013. Whom Mr Osborne selects to replace Mr Wheatley at the helm of the Financial Conduct Authority (FCA) will be a strong indicator of how much more lenient he is prepared to be towards the country’s bruised bankers.

Regulating conduct in an industry whose behavioural problems rival those of a sugared-up toddler was never going to make Mr Wheatley popular. A mission to go after bad bankers and a self-confessed “shoot first and ask questions later” approach made him few friends in the City. But in the years following the financial crisis his fierce independence appeared to be just what the industry needed—and what the public demanded.

His successes included whacking investment banks for rigging currencies and interest rates, and punishing high-street banks for mis-selling complex financial products to the public. Failures included a media briefing so botched it sent life insurance firms’ shares plummeting for no good reason. Mr Wheatley had to bat away questions about whether his FCA was dysfunctional. Bankers much preferred dealing with the Bank of England, whose bigwigs enjoy bank-hostile soundbites but are seen as altogether more accommodating than Mr Wheatley and his team, who had also begun to irritate some in Whitehall.

Hopeful bankers point to other signs that politicians want to smooth some of the sharper edges of financial oversight. In a speech last month Mr Osborne described a “new settlement” with banks, which balances bashing with a measure of support. “Ever-larger fines...just penalise shareholders, erode capital reserves and diminish the lending potential of the economy,” he said. Threats by two giants, HSBC and Standard Chartered, to move to Asia prompted a recasting in the budget on July 8th of the bank levy, an ill-thought-out tax. Such emollience would have been unthinkable even a year ago.

The chancellor has said that the FCA’s new leader will take the organisation to “the next stage of its development”. Some believe this means Mr Wheatley’s replacement will be more accommodating. “The UK wants more of a supervisor and regulator than just an enforcement agency,” says Peter Hahn of Cass Business School. To avoid the impression of being hostile to the City, the government might choose a successor to Mr Wheatley who has a background in banking, he suggests.

Many financiers remain cautious. “It’s tempting to see this as a watershed,” says one, “but we’re unlikely to see a sudden lightening of the burden.” Rather, the change of guard may simply mark the high tide of post-crisis regulation and a change of tone. With the public still distinctly out of love with the finance industry, Mr Osborne is unlikely to move from banker-bashing to hugging in one leap. But his withdrawal of support from the FCA’s tough, strong regulator is as much an indication of his evolving approach as of Mr Wheatley’s effectiveness.