Britain's markets watchdog on Thursday re-cast proposals to publicly name companies under investigation, in its latest effort to defuse an unprecedented backlash against plans that have been labelled misjudged and harmful to London's competitiveness.

The Financial Conduct Authority (FCA) laid out significant changes to its original proposals, including plans to explicitly consider the potential impact on businesses, as it rowed back from an original focus on deterring wrongdoing, encouraging whistleblowing and increasing transparency.

"We have heard the strength of feedback to our original proposals and we are making changes as a result," said Therese Chambers, the FCA's joint head of enforcement and market oversight.

"We hope the greater detail published today supports the further engagement we hope to have on the proposals, before we make any final decisions."

Reuters reported in June that senior FCA officials started making concessions during a charm offensive with industry shortly after announcing the original proposals in February.

Lawmakers, industry bodies and lawyers were fiercely critical, arguing that publicity about investigations, before innocence or guilt is established, risks dealing irreparable and unjustified damage to companies and the finance industry, which accounts for more than 12% of UK tax receipts.

The FCA stresses that it is only proposing giving limited information about an investigation in a "factual and measured way" when this is in the public interest.

FCA Chief Executive Nikhil Rathi, under pressure to rethink or ditch the proposals, told a parliamentary committee this month that he only expected the proposals to lead to around one or two firms under investigation being named per year.

The row hinges in part on the FCA's plan to apply a looser "public interest" test to naming corporate suspects, which critics say was ill-defined. Currently, companies under investigation are named only in "exceptional circumstances".

The FCA now proposes to consider, as part of its public interest test, the potential for an announcement to seriously disrupt public confidence in the financial system or market.

Firms will also be given 10 days' notice ahead of any announcement being made - rather than the single day originally suggested - and a further 48 hours if the regulator presses ahead with a decision to publish.

The FCA, which is juggling objectives to both protect consumers and promote the finance industry's international competitiveness, said it would continue to meet with firms, trade associations, consumer groups and the legal community to discuss the proposals.

Its board plans to make a final decision on the proposals in the first quarter of next year.

(Reporting by Kirstin Ridley; Editing by Susan Fenton)