LONDON (Reuters) – Britain's Financial Services Authority (FSA) said good judgment and not structure would be key to effective supervision as investors shrugged off the biggest shake-up of the banking landscape in a decade.

Analysts said a reform to scrap the FSA confirmed a change of direction already well under way.

FSA CEO Hector Sants signalled the watchdog's new found zeal to crackdown on insider dealing and be more intrusive in the day-to-day lives of banks won't be distracted.

"I don't really consider structure is the central issue. I consider making good judgements is the central issue," Sants told the Chartered Institute for Securities and Investment's annual conference.

Many of the FSA's powers will be transferred back to the Bank of England (BoE) by 2012, the rest divided between two new bodies, one to root out white collar crime, the other to protect consumers and regulate markets.

"We would expect all our new policy decisions to be taken forward into the new structure," said Sants, who will head the Bank's new supervision subsidiary as a deputy governor.

Chancellor of the Exchequer (Finance Minister George Osborne has also unveiled the possible break-up of some banks and a banking tax to shield taxpayers and pay for any future bailouts.

Angela Knight, chief executive of the British Bankers' Association, told Reuters the reforms were "more than shifting the deckchairs" but did not expect UK banks to be broken up and warned that a domestic penal tax without a common global levy would harm British competitiveness.

"We must get it right and not give the impression that we're taking a unilateral leap into the dark," she said.

Although the reform turns the Bank of England into a powerful regulator on its own turf, Sants said financial rules affecting Britain will increasingly be made at the European Union (EU) level.

An outline of the reform had already been well trailed and investors and analysts said there were no major shocks and, by early afternoon yesterday, most shares in top British banks were outperforming the broader market.

"Overall, the UK banks should feel cautiously relieved by the tone and content of last night's speech," said Ian Gordon, analyst at Exane BNP Paribas.

Barclays shares were up 1.77 percent. Shares in part-nationalised Royal Bank of Scotland were up 2.8 percent and shares in Lloyds rose 2.37 percent.

Analysts said there was likely to be more intrusion, but that had been inevitable for some time.

"Expect (Bank of England Governor) Mervyn King to take a much more proactive hand in monitoring and policing the banks' behaviour," said Andrew Lim, analyst at Matrix.

"The process was already under way in the UK and internationally with the stress tests, more capital and better funding," said another analyst, who asked not to be named.

"There has already been a mindset change to how banks are regulated. And there may be a new plaque on the door, but the staff will be the same," he said.

There was less clarity on proposals to examine breaking up banks – which would most affect HSBC, Barclays and RBS – or impose a levy on the industry.

Osborne was expected to provide detail on the tax in his first budget on June 22. It was expected to be similar to a US tax of 0.15 percent on liabilities, rather than on profit.

A tax could cost the industry up to £5 billion ($7.3 billion), depending on its structure, analysts estimated.

"One billion (pounds) is easily digested but five billion (pounds) makes a difference . . . from easy going to fairly drastic measures," said Juergen Lanzer, global specialist for financials at investment firm Schroders.

Osborne's Banking Commission is not expected to report for a year and will be headed by John Vickers, former head of consumer watchdog the Office of Fair Trading and chief economist of the Bank of England.