Shadow treasurer Chris Bowen has defended Labor's campaign to derail the appointment of banking executive John O'Sullivan to take over as head of the corporate regulator.

Key points: John O'Sullivan withdrew from the running to replace Greg Medcraft

John O'Sullivan withdrew from the running to replace Greg Medcraft Labor argued Mr O'Sullivan was unsuitable for the role given his ties to the Liberal Party

Labor argued Mr O'Sullivan was unsuitable for the role given his ties to the Liberal Party Shadow treasurer Chris Bowen says he is glad Mr O'Sullivan has withdrawn

Mr O'Sullivan is currently chairman of Credit Suisse in Australia, and was in line to replace the outgoing ASIC chairman Greg Medcraft after an independent selection process.

But late yesterday, Mr O'Sullivan wrote to Treasury Secretary John Fraser to say he had withdrawn his candidacy, citing Labor's personal attacks.

Mr Bowen led Labor's efforts to discredit Mr O'Sullivan, a long-time Liberal Party donor, on the grounds of his close ties to the Prime Minister.

For Labor, Mr O'Sullivan is an important scalp given its major commitment of a royal commission into the banks if it wins the next federal election.

But Mr Bowen is making no apologies, despite Greg Medcraft's appointment as a Labor favourite under the Gillard government.

"I'm glad that Mr O'Sullivan has realised what Mr Turnbull and Mr Morrison appear to not have realised that this appointment would be utterly unsustainable," he told the ABC.

"Many years back [Mr Medcraft was a Labor member], and look we've supported and worked with people who have been members of the Liberal Party.

"The chairman of ASIC is meant to be the tough cop on the beat, and Mr O'Sullivan could not be a tough cop on the beat."

Mr O'Sullivan's letter of withdrawal, seen by the ABC, is tinged with bitterness.

In it, he said he was only prepared to be considered as a part of an open and competitive process.

But Mr O'Sullivan said he was deeply shocked by the vitriol of Labor's "insinuations of old and long since discredited allegations".

"The personal nature of that attack, even including insinuations of old and long since discredited allegations... was unprecedented and disturbing," the letter read.

Appointments have become a 'political football'

Alan Fels, a former chairman of another big government regulator, consumer watchdog the ACCC, said top regulatory appointments are now more political than ever.

Without buying into Labor's campaign, Professor Fels said Mr O'Sullivan needed to pass the impartiality test.

"Chair of ASIC, chair of ACCC, some other big regulatory jobs — they're really important high level. They're often far more important than most members of parliament," Professor Fels said.

"They're people who have to be impartial and independent and settle really big disputes, financial matters and matters affecting the reputation of corporations.

"The whole thing, perhaps inevitably is becoming a bit of political football. I can't see any real escape from that."

Financial Services Minister Kelly O'Dwyer, who is responsible for ASIC, was not available for an interview.

But a spokesman said the Government conducted a merit-based selection process after a worldwide search.

It is understood there will be an announcement on Mr Medcraft's replacement as ASIC chairman before he retires on November 12.