The chancellor said the financial sector was an important provider of jobs
Banks will leave the UK and relocate overseas if there is not international co-operation on any tougher financial regulation, the chancellor has said.
Alistair Darling told the Commons Treasury Committee he did not want to take the risk of acting unilaterally.
The Conservatives have said they would create a new tax on banks even if other countries decided not to do so.
Mr Darling also said Labour's planned rise in National Insurance next year would have an "impact" on jobs.
The chancellor spoke as revised figures showed the UK economy grew more strongly than was previously thought - by 0.4% - in the last three months of 2009.
He said he was confident of a sustained economic recovery, adding: "It's modest growth, which is why I do think we have to be careful, but it's growth nonetheless.
"Taking away support now would be disastrous."
Mr Darling was facing questions from the committee following last week's Budget.
He was asked several times by Conservative MP Michael Fallon to put a figure on the number of job losses expected as a result of Labour's planned 1% rise in National Insurance (NI) next April.
But Mr Darling refused to give a figure - despite being accused by Mr Fallon of being "evasive".
"We take into account everything that is happening in the economy, not one particular thing," the chancellor said.
"But we said we think the impact [on jobs] is manageable, it'll be limited, because you've got to take into account everything else that's happening at the time.
"Remember the National Insurance increase doesn't come in for another 12 months yet - when we expect the economy to be growing - and I hope we will then see jobs increase."
The Conservatives announced on Monday they would scrap the bulk of the NI increase if elected.
Commenting on Mr Darling's evidence, shadow chancellor George Osborne said Mr Darling had "admitted to the Treasury Select Committee that his National Insurance tax rise would cost jobs".
"How many? There must be an internal Treasury estimate - so what is it?" Mr Osborne said.
"Either he knows how many jobs his national insurance tax rise will cost and he is not telling us - or he doesn't care."
Mr Darling was also asked by Mr Fallon for specific details of cuts to departmental budgets and whether it would be "more honest to come clean about those cuts before the election".
But the chancellor said he could not say what cuts each government department would face, because a comprehensive spending review had not yet been conducted.
He said he did not want to see a return to the situation that existed before the credit crunch, where the UK economy had been overly reliant on financial services.
But he told the committee: "It would be a big mistake for us not to recognise that this is a sector that not only generates a million jobs at home, but it does provide services that people rely on in different parts of the world.
"London is a very important centre, and I'm determined that we keep it an important centre."
But he admitted he was "frustrated" with some European countries which he believed were not acting with enough urgency to reform their banking sectors and get their economies growing again.
And he said he had chosen to revise downward the UK's growth forecast for 2011 because he was "concerned" about the situation in Europe.
"I am frustrated by the lack of movement in Europe. It would be wrong to say there's been no change, but in places it has been sclerotic."
On Monday, Mr Darling took part in a live televised debate with his Tory and Lib Dem counterparts, George Osborne and Vince Cable.
In it, the chancellor branded the Tories' plan to cancel the National Insurance rise "irresponsible", but Mr Osborne said it would penalise hard-pressed families and businesses at a time when the economy was "not working".
Mr Cable said Labour had done "real damage" to the economy but that if elected, the Conservatives would "get their noses in the trough and reward their rich backers".