A Bradford financial services chief has given a cautious welcome to the planned shake-up of the industry’s regulation and a review of UK banks unveiled by Chancellor of the Exchequer George Osborne.

Yorkshire Building Society boss Iain Cornish said that, while he saw the logic of concentrating financial regulation with the Bank of England – making it the world’s most powerful central bank – it was not without risk and represented “an awful lot of responsibility in one place”.

Mr Cornish also urged the new Commission set up to look into how banks operate not to focus solely on whether they should be split up. He said: “Whether the retail and investment parts of a bank are separated is really a bit of a red herring and would certainly not provide a panacea for preventing another banking crisis. Lehman Brothers was not a retail bank and Northern Rock was not an investment bank, and they both went under.

“I hope that the Commission carries out a root-and-branch review of the banking system and doesn’t become preoccupied with whether banks should be split or not.

“After all, it’s not that easy to define the difference sometimes. For instance, all retail banks have a treasury function which deals on the markets. At what point does that activity count as an investment bank?”

Mr Cornish urged building societies to play a full part in the review, which he said offered the mutual sector an opportunity to shape the future of financial services in the UK.

On the abolition of the Financial Services Authority by 2012, Mr Cornish said his concerns about concentrating so much power in the Bank of England had been eased by the appointment of Hector Sants – the outgoing FSA chief – as a deputy governor of the Bank of England Mr Cornish, who sits on the FSA Practitioners Panel, representing a cross-section of financial organisations, said: “It’s important that the shake-up does not ignore the good work done by the FSA over the past three years.

“I welcome the fact that the Chancellor highlighted the complexity of the task ahead. The fact is that there’s not a single simple answer to how you change the regulatory and banking system to try and ensure that we don’t have another crisis. This is complex.”

Announcing the changes to financial regulation in his Mansion House speech to the City, the Chancellor said it would produce “a new settlement between our banks and the rest of our society – a fairer settlement in which the banks support the people, instead of the people bailing out the banks.”