The chief executive of the Financial Services Authority (FSA), Hector Sants, has announced he will leave the regulator in June.
It means he will not take up his planned role as boss of the new the Prudential Regulation Authority (PRA) which is due to start operating in 2013.
He had previously resigned in 2010 but was persuaded to stay on by George Osborne to oversee the Governments planned changes to financial regulation and was due to become the PRA's new head next year.
His role within the FSA will be taken over by former Bank Of England Chief Cashier Andrew Bailey, by Mr Osbourne will have to look for a new PRA supremo in the coming months.
His resignation follows the announcement only last month that FSA Managing Director Margaret Cole will leave later this year.