An unnamed aide to George Osborne, the new chancellor of the exchequer, told the Financial Times that the regulator may well survive the planned overhaul of the financial system.
The Conservative party originally claimed that it would remove the FSA, instead shifting regulatory power to the Bank of England and its governor Mervyn King.
In an interview with the BBC last year, Mr Osborne said that it would have been wrong to continue with a system of financial regulation which âfailed so spectacularlyâ.
However, some figures in the City are reported to have feared that removing the FSA would be too much of an upheaval for an economic system still in recovery.
Meanwhile, Mervyn King has called for the new government to undertake âcareful thought and discussionâ before deciding on the set up of the new regulations.
âRight through this I have always said that what concerns me most is what the nature of regulation is, not who does it. I can reiterate that today. I have never made any pitch for any particular responsibility but we are concerned about its nature.â
According to the FT, the FSA would still exist but be overseen by the BoE as part of the new regulatory system.
By Jim Ottewill