By Margot Patrick Of DOW JONES NEWSWIRES LONDON (Dow Jones)--Bank investors and analysts Thursday saw the brighter side of U.K. government plans to radically overhaul banks' supervision and potentially restrict their activities, with major bank shares rising and analysts saying the proposals weren't as onerous as feared. The plans, laid out by Chancellor of the Exchequer George Osborne in a speech to business and finance executives Wednesday night, include turning supervisory powers over to the Bank of England from the Financial Services Authority, introducing a new bank levy and establishing a commission that will review the banking system and decide if banks need to split their retail and investment banking arms. "Overall, the U.K. banks should feel cautiously relieved by the tone and content of last night's speech," said Ian Gordon, an analyst at Exane BNP Paribas. Analysts at RBS agreed that the tone of the speech was "much more positive than it might have been," and recommended buying U.K. bank shares. Shares in Barclays PLC (BCS), which is seen as having the most to lose from a potential break-up of its retail and investment banks, rose 3.1%, to 316 pence at 1320 GMT, while 83% state-owned Royal Bank of Scotland Group PLC (RBS) was up 3.3% at 47 pence. Part government-owned Lloyds Banking Group PLC (LYG) rose 2 pence, or 4.2%, to 58 pence. "A radical restructuring of Britain's largest banks still seems far from inevitable, given the absence of international agreement, the European Union constraints on unilateral U.K. action, the cost to the taxpayer as the owner of significant stakes in banks and as a stakeholder in the U.K.'s financial center and the fact that smaller, more focused institutions do not necessarily present less systemic risk and may risk being too small to succeed, even if not 'too big to fail,'" financial services lawyers at Clifford Chance said in a note to clients. Michael McKee, a partner in DLA Piper's financial services team, said the proposals could lead to the most substantial new legislation for the sector in 10 years, though it isn't immediately obvious that the changes proposed "are so superior to the current arrangements as to justify the severe disruption and uncertainty they will introduce for financial institutions about the regulatory environment they will operate in." Governments and regulatory bodies across the world are rolling out new laws and policies in an effort to bolster the financial system and protect governments against having to strain their own finances to bail out banks. Terence Burns, the U.K. chairman of Spanish bank Banco Santander SA (STD), which has 1,300 U.K. branches, said Thursday that most of those reforms, including the ones in the U.K., are welcome but that the timing of their implementation is a concern. -By Margot Patrick, Dow Jones Newswires; +44 (0)20 7842 9451; margot.patrick@dowjones.com (Patricia Kowsmann contributed to this article.) (END) Dow Jones Newswires June 17, 2010 09:26 ET (13:26 GMT)