Bank reforms considered by Tories

The Conservatives are considering giving the Bank more control

The Tories are considering giving more powers to the Bank of England to oversee financial institutions, George Osborne has confirmed.

One of Labour's first acts in 1997 was to dilute the Bank's power by sharing its responsibilities with the Financial Services Authority and the Treasury.

Speaking on BBC Radio 4's Today programme, Mr Osborne said this was one of Gordon Brown's biggest mistakes.

The government is preparing to publish a white paper on the issue.

Mr Osborne said: "The tripartite system between the chancellor, the Bank of England and the FSA has simply failed. I mean, it failed to spot the growing financial crisis, it has led to serious lack of coordination in dealing with problems like Northern Rock", Mr Osborne said.

"You now see open bickering in the newspapers between some elements of the tripartite relationship. You know, none of that is healthy, not least when we're still dealing with a credit crunch."

'Proper and correct'

The Conservatives are looking at changing the system if they get into power, by placing more control of financial institutions in the hands of the Bank of England.

George Osborne stressed during the interview that a final decision would come after he had looked at the government's own proposals for reform.

The shadow chancellor also denied reports that his party had received leaked information from the governor of the Bank of England.

HOW THE SYSTEM WORKS NOW FSA spots that a bank is failing Bank of England decides what to do about it Treasury provides public money and nationalises if necessary Q&A: Shake-up for regulation Robert Peston's blog

He said the opposition's relationship with Mervyn King was "entirely proper and correct".

The Chancellor, Alistair Darling, and the Bank of England governor, Mervyn King, have clashed on what needs to be done to control banks and prevent a repeat of the financial crisis.

In his annual Mansion House speech to the City on 24 June, Mr Darling said he had no plans to fundamentally change the system of regulation.

But Mr King called for the Bank to have more authority to intervene in the actions of banks seen to be behaving riskily

The government is preparing to launch a white paper on the issue the week after next, but its publication has been delayed. It is expected to give further powers to the Financial Services Authority.