As part of the plans, the Financial Services Authority (FSA) - which has been the chief regulator of the industry â "will cease to exist in its current form", Mr Osborne stated.
The division which monitors banks and other financial services firms will survive, but will act as a subsidiary of the Bank of England.
Mr Osborne stated that further details of the plans will be given to parliament by financial secretary Mark Hoban today (June 17th 2010).
He went on to criticize the way in which financial regulation had worked before in the UK, in which responsibility was shared between the FSA, the Bank of England and the Treasury.
"No one was controlling levels of debt and when the crunch came no one knew who was in charge," the chancellor said.
His plans have been welcomed by FSA chairman Lord Turner, who said the changes will help "bridge the gap between macro-prudential policy and the supervision of individual firms".
By Tony Aynsley