Bank chief: I told Brown to protect investors long before the Northern Rock collapse

The Bank's Governor Mervyn King said he had pressed "pretty hard" for new laws to protect investors in the event of a banking collapse and stressed the Government needed to act with "some urgency".

His comments raise questions about whether Mr Brown should shoulder some of the responsibility for this summer's run on Northern Rock. It is understood the Bank of England had called for legislation when Mr Brown was still chancellor and long before the Northern Rock disaster this September.

Mr King implied that if the Government had acted it could have prevented the first run on a bank in Britain for 150 years.

The Governor also shone the spotlight on present Chancellor Alistair Darling's role in the crisis, revealing he had made the decision not to grant a rescue bid by LloydsTSB.

Shadow chancellor George Osborne said Mr Darling now faced two serious questions: "First, why did he and the Prime Minister ignore the recommendations of the Governor of the Bank of England to introduce new legislation that could have prevented the run on Northern Rock?

"Second, why did he reject the approach from LloydsTSB that would have averted the crisis?"

In a lucid analysis of why Northern Rock had come unstuck, Mr King said the Bank should have tried harder to make sure "people understood and took account" of the warnings it made "in the years leading up" to September's crisis.

Asked what else the Bank would have done differently, he replied: "We would have pressed even harder than we did and we did press pretty hard - to inject some urgency into the need for new legislation to enable there to be a procedure for pre-emptive intervention in banks in the form of deposit insurance."

He said such a "facility" would have been "very attractive".

"If we had had that power that is something I'm sure we would have exercised... because that would have prevented a retail run on the bank. We don't have that power in Britain and we need it," he told the BBC's File On 4.

He said the Chancellor made the final decision not to support an attempt by LloydsTSB to take over Northern Rock bank shortly before the scale of its exposure to the American sub-prime crisis was exposed.

Talks broke down after Lloyds demanded a £30 billion Bank of England loan at competitive rates as part of the deal.

Mr King said Britain's financial system remains at risk of further Northern Rock-style shocks.

He said it would be "several more months" before banks would be able to return to normal after the American sub-prime mortgage crisis. "I think most people expect that we have several more months to get through before the banks have revealed all the losses that have occurred, and have taken measures to finance their obligations that result from that, but we're going in the right direction.

"There is always, in a period like this, the possibility that a shock from outside the UK, might create further fragilities but to some extent there are always risks, there are always fragilities... The situation now is different from that in August, though not without risk."

A spokeswoman for the Bank of England refused to say when it first started lobbying the Treasury for a change in the law.

A Treasury spokesman said: "The tripartite authorities keep under constant review the range of instruments available to maintain financial stability.

"All were agreed of the need to consider further improvements to legislative framework. Proposals will be taken forward in the next session to achieve this."