Alistair Darling has warned that he will impose tougher regulation to avoid a repeat of the banking crisis amid fears of a return of the bonus-driven, risk-taking culture in the City.

The Chancellor told The Independent newspaper that bankers who are too complacent will be “brought back to earth” by new legislation.

An important White Paper on the banking sector, due next week, will grant new powers to the Bank of England and the Financial Services Authority (FSA), Mr Darling said.

He promised “new tools” for the regulatory bodies to strengthen their powers, which could mean that the FSA will be able to extend its reach to hedge funds, some of the riskiest investment funds.

As indications have emerged recently that the global economic crisis may not be as extensive as was first thought, banks may become less worried about the future.

Mr Darling has urged the banks to be more careful in future.

He said: “If they go back to the way they were - to business as usual - without asking themselves over and over again what they are doing, that would be disastrous for them and the rest of the world.

“As the economy begins to recover, people must not drop their guard but strengthen their guard to make sure they don’t repeat the mistakes of the past.”

However, the White Paper will not include a cap on bonuses, which have come under attack for encouraging excessive risk-taking in financial institutions.

It will also maintain the existing tri-partite structure of the financial regulatory system, which includes the FSA, the Bank of England, and the Treasury.

Rumours of a power struggle between the Bank, led by Governor Mervyn King, and the FSA were played down by Mr Darling in the interview.

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