A former senior Bank of England executive and managing director of the Financial Services Authority, the UK’s financial regulator, is to lead the UK government’s review of how to treat offshore UK financial centres, an issue that has surged in controversy due to the fate of bank accounts held in failed Iceland-based banks.

Michael Foot, who is currently chairman of the firm Promontory financial Group, will lead the review, which is to examine the “immediate and long-term challenges” for such centres, such as financial supervision and transparency, tax, financial crisis management and international co-operation.

The decision to hold a review was announced last week in the UK government’s annual pre-budget report.

The collapse of Icelandic banks such as Kaupthing, which operated accounts in centres such as the Isle of Man via one of its local subsdiaries, put offshore centres under a harsh spotlight when the UK government balked at using taxpayers’ money to bail out UK savers using offshore accounts.  The issue threatened to call into question whether UK nationals could use such centres in the future.

The government, however, said it had no intention to interfere with the tax-setting freedoms or independence of such centres.

“The government has been clear that the variety of existing constitutional arrangements in place across these territories will continue to be respected, including their independence in fiscal matters and the setting of their own rates of taxation,” the government said.

The Minister for the Crown Dependencies, Lord Bach, said: "This review is an opportunity for the Crown Dependencies [ UK offshore centres] to demonstrate their may be helpful to those overseas territories, with significant financial services industries, to prepare for the challenges of the future.”

Only those Crown Dependencies and Overseas Territories with significant financial sectors are included in the scope of the review:  Jersey, Guernsey, Isle of Man, Bermuda, Cayman Islands, Gibraltar, Turks and Caicos Islands, British Virgin Islands, Anguilla.

Out of the review’s scope are: Falkland Islands, Montserrat, South Georgia and the South Sandwich Islands, British Antarctic Territory, British Indian Ocean Territory, Sovereign Base Areas of Akrotiri and Dhekelia, Pitcairn Islands, Saint Helena.

Michael Foot is currently the Chairman of the UK office of Promontory Financial Group.  Following an extensive career in the Bank of England and FSA, Mr Foot joined Promontory from the Central Bank of The Bahamas, where he was Inspector of Banks & Trust Companies from 2004 to 2007. From 1998 to 2004, Mr Foot was a managing director of the Financial Services Authority.