The prospect of risk managers being regulated by the FSA is unlikely, according to senior market sources.

One source close to government said: "The Treasury reckons there is no public interest in this development."

The comment follows speculation that direct regulation of risk managers by the FSA could prompt multinationals to avoid setting up in the UK or even leave the UK.

The FSA would have pursued the regulation under sales of general insurance rules.

The FSA has not ruled out the prospect of risk managers falling foul of the regulations that are due to come into force on 14 January 2005.