Commons 'rottweiler' welcomes Code plan

The Labour MP and rottweiler of the committee said new initiatives that allow stricken banks to be rescued without causing panic on the streets and in the financial markets were needed in the wake of the summer carnage.

His comments came as the Chancellor considers handing new powers to the Bank of England to mount covert rescues of troubled banks.

Darling is mulling changes to the Takeover Code that would allow the authorities to arrange "white knight" deals in secret in a matter of days rather than the mininum 60-day period under current rules.

The Chancellor is sceptical that a search for a buyer of a crisis-hit bank could remain a secret but is keen to give the Bank of England all the tools it needs to do its job.

McFall said: "The question he has got to address is how to address a failing bank without causing systemic failure, how can you address a failing bank without contaminating others? Any initiatives on that area would be welcome."

Darling was grilled by McFall and other members of the committee yesterday as the fallout from the Northern Rock crisis continued.

Without referring to specific plans to change the Takeover Code, the Chancellor told MPs: "If central banks are to do their job, there will be times where they need to do things without being aware of it because it's in the public interest. If you had to make a public annoucement every time you did anything, that could actually make a difficult situation much worse."

News that Northern Rock was forced to borrow emergency funds from Threadneedle Street sparked panic and prompted the first run on a British bank since Victorian times.

Lloyds TSB was lined up to rescue Northern Rock in a covert operation before the run on the bank but the deal fell through. Bank of England Governor Mervyn King has claimed such an operation was blocked by market abuse regulations and City takeover rules and has also called for changes to the law.

Plans to reform the Code came as private-equity group JC Flowers unveiled a heavyweight management team to run Northern Rock if its bid to take over the bank is successful.

Paul Myners, former chairman of Marks & Spencer, would become chairman with Richard Pym, former chief executive of Alliance & Leicester, as chief executive "for the initial period of stabilisation".