Investors in British banks got the jitters over Mr Don Cruickshank's March report on competition in the banking industry, which accused the banks of making "excess profits" of up to £5 billion sterling (€8.26 billion).
But yesterday's response by the Treasury to his 55 points went down well with the markets, where bank shares were up slightly.
The Treasury rejected Mr Cruickshank's call to crack down on bank mergers and left self-regulation in place in several key areas.
"The big hits were already in the marketplace," said Mr Tim Sweeney, director general of the British Bankers' Association. "There is not a lot in this that we didn't expect."
Mr Gordon Brown, the chancellor, had already announced two clampdowns on the banks, both of which gave shareholders cold feet. The first is an investigation into a possible complex monopoly over small business banking by the Competition Commission, which is due to report next summer.
The second, a new watchdog to oversee payments systems such as cheque clearing and credit cards, has raised fears among the banks of a layer of new regulatory bureaucracy.
Yesterday, the Treasury said it would widely consult on the rules for the new regulator, making it unlikely that the legislation required would be approved before the next election. The Treasury insisted the Paycom regulator would not be delayed. "We genuinely are trying to do this as quickly as possible," it said.
Yesterday's response covers all the recommendations made by Mr Cruickshank, although it notes that in several areas such as cash machine charges and access to the ATM network by non-banks the banks have met the report's requirements.
The main points include:
No immediate crackdown on bank mergers. Mr Cruickshank called for automatic referral of any mergers involving "material shares of the relevant market", but ministers believe the existing system is adequate until a Department of Trade and Industry review of merger policy is complete.
A review of the Financial Services Authority two years after it starts operations next summer to test its impact on competition. The review will consider splitting the dual roles of chief executive and chairman, currently held by Sir Howard Davies.
An increased focus on competition in Whitehall, including cost-benefit analysis of new regulation and a rewritten Treasury mission statement to include the promotion of competition in financial services. Competition analysis will also be included, by default, in submissions to the chancellor.
An investigation of the voluntary banking code of practice by a panel of consumer representatives. However, a call for service standards to be set by the banking ombudsman was rejected on the grounds that it could create a rival rule-making body to the FSA.
A new set of Cat standards covering costs, access and terms for credit cards. These will be issued for consultation in the autumn, with the aim of setting the standard in the spring to increase disclosure of terms usually hidden in the small print.
