ALISTAIR DARLING’s proposed reforms of banking regulation, to be published next month, will retain a significant role for the Treasury in financial supervision. His proposals will be seen by some as a further sign of tension between the Treasury and the Bank of England.

Both the Bank and the Financial Services Authority (FSA) have called for new tools to be made available for policing the banks. The Bank, which published its Financial Stability Report on Friday, listed a range of new weapons it believed would be necessary. They included a “tax” on bigger and more complex institutions, with more onerous capital and regulatory requirements.

It said that “dynamic provisioning” could help, as used in Spain, where banks are required to hold more capital in good times. But it would need to be used in conjunction with other measures. These could include direct controls on the growth of lending, minimum requirements for margins and structural funding limits.

The Treasury is sympathetic to the idea of increasing the range of tools available to regulators but is also concerned that handing over some of them to the Bank or FSA would establish a framework that was politically unaccountable.

Insiders give the example of a lending clampdown introduced a few months before a general election, with significant economic and political consequences.

Darling’s proposals will retain a Treasury veto on any such measures.

The chancellor’s white paper, originally intended for this week, will contain both short- and long-term proposals, with some of the latter not intended to take effect until after the election.

As the battle over regulation continues, business’s disquiet with the banks persists. A survey by the British Chambers of Commerce, to be published this week, reports that only 6% of firms say access to finance has become easier over the past three months, while for 20%, it has got worse.

Times Recommends

• Minister in talks with Saudis to protect creditors
• Premier Inn hits back in £29-a-room row
• Bankers hit back at 'populist' bonus supertax