The Financial Conduct Authority said it will publish fundamentally reshaped” name and shame proposals “in the next week, or so”.

The watchdog’s chief executive Nikhil Rathi said its new plans will be heavily revised from its controversial views to name companies under investigation it released to the market in February.

Rathi was appearing before the House of Lord’s Financial Services Regulation Committee alongside FCA chair Ashley Alder.

Its proposals to release the names of firms it is probing if it believes it is in the public interest has been met with fierce City opposition, who say the move will destabilise firms who have not yet been found guilty of misconduct.

Earlier this year, 16 finance trade bodies — including UK Finance, The Investment Association and TheCityUK — wrote to the then Chancellor Jeremy Hunt asking him to intervene.

Rathi said: “We have heard concerns that the public interest test is too vague. We will address that, and we will also be mindful of small firms.”

Its revised plan would include giving companies at least 10 days’ notice before disclosing they were being investigated, instead of only one day as initially proposed.

He added: “This is not a case of us opening up the entire book of investigations — that was never our intention.”

The regulator said out of its 47 open investigations into regulated companies, he said their identity was already public in 27 cases, often disclosed by the firm itself.

The FCA already has the power to name the companies it was investigating in exceptional circumstances.

Rathi added: “If we do this in two or three more cases of regulated firms a year, then we are not talking about a big change.”

The chief executive said the regulator was currently in a situation where members of the public can call it up to see if a firm is covered by its regulation.

“If we say yes, that person will go away with the idea that the firm is a proper investment – but we may already have amassed serious concerns about that company,” said Rathi. “These are the issues we are tussling with.”

He added that the body regularly works with other regulators such as Ofcom and the Financial Reporting Council who have in the past named firms they were jointly investigating, while it had not.

The FCA has previously come under pressure from MPs to be more transparent about its enforcement work, including a call two years ago from the House of Commons public accounts committee as part of its investigation into the British Steel workers’ pensions mis-selling scandal.

However, critics point out that two-thirds of FCA investigations in the past have ended without any enforcement action, raising concerns that it could damage the reputation of companies by disclosing their identity even if the probe ended up not finding any wrongdoing.

The House of Lord’s Financial Services Regulation Committee will publish its report on the issue next month.

The FCA’s Alder added that the watchdog’s board will decide whether to go ahead with the plan in the first quarter of next year.