Financial Services Authority board member and interim managing director Margaret Cole is to step down from the City watchdog.
She will leave her post after failing to get the top job at what will become the Financial Conduct Authority, the Telegraph said.
Martin Wheatley, who joined from a Hong Kong regulator, will take the reigns of the new body.
Cole was expected to take a senior role under the new regulatory structure but will now remain in the organisation at the end of March. She will then be on gardening leave until August 31 and may represent the FSA during that time.
She said: “I joined the FSA to help in the fight against wrongdoing within the financial services industry and I believe a lot has been achieved in my time here.”
Cole was with the regulator for nearly seven years and formerly specialised in commercial litigation.
She added: “It has been a challenging but rewarding few years and I believe, with the help of a team of quality people, I have created a successful enforcement platform to take into the UK’s new regulatory authorities.
"The time has come for me to seek a fresh challenge, knowing that I leave the continuation of a winning strategy in safe hands.”
Last month a treasury committee declared the FSA was "dominated by a box-ticking culture" and had been unsuccessful in protecting people from "spectacular" regulatory failures such as the mis-selling of payment protection insurance (PPI).
It said the government must put competition "at the heart of the new regulatory framework", ahead of the drafting and publication of the Financial Services Bill this year.
Treasury Committee chairman Andrew Tyrie said: "The plain fact is that the FSA did not succeed in protecting consumers from spectacular regulatory failures.
"The mis-selling of PPI and endowment mortgages are just two examples.
"The FSA is not only expensive, for which the consumer always pays, but many have told us that it has also become bureaucratic and dominated by a box-ticking culture. The creation of the Financial Conduct Authority (FCA) is an opportunity to create something much better."