'Big Treasury role' in bank reforms

Alistair Darling could retain significant Treasury role in bank reforms, it was reported

The Chancellor could retain a significant role for the Treasury in his reforms on banking regulation, it was reported, as rumours of a rift with the Bank of England continued.

The proposals, which have already fuelled suspicions of a spat with the BoE, will be seen by some as a further sign of hostility, according to The Sunday Times.

Alistair Darling's hotly anticipated White Paper was due out in the next week but has been pushed back, the Treasury confirmed.

Both the BoE and the Financial Services Authority (FSA) have called for more powers to be made available to police the financial sector in the wake of the financial crisis and bank bailouts.

It is understood the Treasury is sympathetic with increasing the range of tools available to regulators, but is concerned that giving extra powers to the BoE or the FSA would create a situation that was politically unaccountable.

Mr Darling's proposals will therefore retain a Treasury veto on such measures, The Sunday Times said. A spokesman for the Treasury said he could not speculate on the report although the Chancellor has already stressed that the "Tripartite Authority" - the Treasury, BoE and FSA - would remain intact.

The department is thought to believe the Treasury's role is crucial in the trio because of the direct political accountability of the Chancellor.

BoE governor Mervyn King embarrassed the Government this week by telling MPs he had not seen a draft or been consulted on Mr Darling's White Paper on banking reform, although he played down suggestions of a rift with the Treasury.

Earlier this month, at a Mansion House dinner, the Chancellor and the governor set out markedly different positions on regulation and the handling of public debt.

Speculation on the contents of the proposals has already suggested the Bank is set to lose its remit for maintaining financial stability as part of the reforms, with that statutory responsibility shifting to the FSA, despite criticism of its performance in the run-up to the credit crunch.