Oversight of the £24bn worth of “taxpayer investment” in foundation trusts is to be moved to a banking function “established by the Department of Health”.

The move follows a decision it would not be appropriate for the foundation trust regulator Monitor to continue to have an interest in the good management of such assets once it becomes the general economic regulator for all providers of health services.

Monitor currently exercises that oversight through its compliance regime.

But the memorandum accompanying today’s health bill says the health secretary instead intends to move the function to “an operationally independent banking function which would be established by the Department”.

The move follows Whitehall discussions about effectively moving Monitor’s compliance regime to the foundation trust financing facility – currently a division of the DH.

Under those discussions, the financing facility would behave like a bank and exert control over foundations through the use of regulations similar to bank covenants in relation to debt.

That would involve treating the £24bn taxpayers’ investment in foundations – referred to as the £24bn of public divided capital – like debt to the financing facility.

The bill memorandum states: “The taxpayer investment in foundation trusts would no longer be managed through foundation trust specific statutory controls but through conditions to be applied to loans, public dividend capital and guarantees of payments under externally financed development agreements.”

It says that would those conditions would be applied “by an operationally independent banking function which would be established by the Department” and the conditions would be “consistent with those that would be applied by any lender with a significant investment in an organisation”.

However, foundations will be cautious about the prospect of foundation controls returning to the DH.

Foundation Trust Network director Sue Slipman told HSJ foundation trusts would only be satisfied with the arrangement if the health secretary gave a “clear commitment” to the bank’s operational independence.

She said that commitment would need to come in the form of a “self denying ordinance” from the health secretary that the bank’s conditions could not be used as a mechanism for “pushing an order to foundations” without changing the primary legislation.