MPs turned up the heat on the Bank of England's Governor yesterday, warning him that the Bank needed to bolster its role in financial stability and to communicate more effectively.

Mervyn King's reappointment for a second term was unanimously backed by the cross-party Commons Treasury Committee, but it told him that he should draw on stronger back-up in future, particularly in these two key areas.

The MPs said that testing times lay ahead for Mr King. “[His] skills, qualities and experience will be greatly needed and tested in facing the challenges of his second term, not least [those] arising from the current market turmoil and from anxieties over inflation,” their report said. “We expect the Governor will wish to strengthen the support and advice available to him to meet those challenges, particularly in the field of financial stability and in improving communications strategy and delivery.”

These strictures reinforced the tougher message of the committee's earlier report on the fallout from the Northern Rock debacle and the credit crisis that began in August.

Then, the MPs told Mr King that he had failed to do enough, soon enough: “In our view, the lack of confidence in the money markets was a practical problem and the Bank of England should have adopted a more proactive response.”

In that report, the committee called for better communications to prevent panic, as well as a beefed-up role for a Bank deputy governor and head of financial stability to act as a key adviser to the Chancellor.

Hector Sants, chief executive of the Financial Services Authority, said yesterday that the FSA was considering imposing stricter liquidity rules on banks and building societies to prevent a Northern Rock-style fiasco.

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