Bank's No 2 to stand down early

By Robert Peston Business editor, BBC News

Sir John was accused of not being on top of the Northern Rock crisis

Sir John Gieve is to stand down early as Deputy Governor of the Bank of England, as revealed by the BBC.

Sir John is in charge of the Bank's operations responsible for the stability of the financial system.

His departure comes as the Treasury moves to strengthen the Bank's financial stability role.

The Bank's chief economist Charles Bean is expected to be named a deputy governor. Mr Bean will take charge of the Bank's monetary policy side.

Mr Bean will replace the other deputy governor, Rachel Lomax. It is unclear who will replace Sir John.

Long-term commitment

In a statement, the Bank of England said: "Sir John Gieve has decided he will leave the Bank next year."

Sir John said he would step down once changes he had been overseeing to the Bank's financial stability role were in place.

He said the role of both the Bank of England and its deputy governor for financial stability would be changing from spring 2009, including taking on the "key" role in dealing with failing banks.

While he fully supported the changes, Sir John said: "Once the legislation is in place, building up the new capabilities in the Bank will require a long-term commitment.

"It makes sense for someone else to take on this task who is prepared to commit himself to a full five year term. I have decided therefore to step down at that point."

Interrogated

The Bank of England's senior directors would probably wish the new financial stability Deputy Governor to be Paul Tucker, the Bank's executive director in charge of markets.

The Treasury is refusing to comment on the changes.

Sir John was savaged when interrogated last autumn by the Treasury Select Committee for allegedly being insufficiently on top of the crisis at Northern Rock. His colleagues regarded the attack as unfair.

However Sir John is not a markets specialist. And it is thought that the Treasury wants someone with greater technical knowledge in charge of an expanded financial stability division at the Bank.

Sir John was appointed Deputy Governor in January 2006 and has two and a half years of his term to run.

His appointment was pushed through by Gordon Brown, when he was Chancellor, in the face of stiff resistance from the Bank of England Governor Mervyn King.

Mr King recently had a battle with the Treasury to have his preferred candidate, Charles Bean, appointed as the replacement for Ms Lomax.