Sir John Gieve 'to stand down' early as Deputy Governor of the Bank of England over Rock fiasco

Sir John Gieve, one of the most powerful figures at the Bank of England, is to step down early.

The deputy governor, who was responsible for the Bank's oversight of the financial markets, came under fire for the way he handled the Northern Rock crisis and the credit crunch. 

A former Whitehall mandarin, Sir John (pictured) was criticised by both MPs and City experts because he lacked direct experience of the financial services industry.

His departure, two-and-a-half years early, is to be announced today.

It comes amid sweeping changes to the way the Bank, the Treasury and the Financial Services Authority oversee the City.

Chancellor Alistair Darling wants to push through major regulatory reforms to prove he has learned the lessons of the Northern Rock collapse. 

The Bank is to receive additional powers to intervene when market crises such as the sub-prime debacle are looming.

And a committee is being formed to steer it, which will be chaired by governor Mervyn King.

The Bank's markets director Paul Tucker is seen as a strong candidate to replace Sir John because of his close contacts within the City.

Another deputy governor, Rachel Lomax, is preparing to retire. She is expected to be replaced by the Bank's chief economist Charlie Bean.

Sir John Gieve was criticised for the way he handled the Northern Rock crisis and the credit crunch

Last night Darling defended his handling of the Northern Rock affair but admitted major changes to regulation are needed.

In his Mansion House speech, he said: ‘no system of regulation, of course, can or should prevent the failure of each and every institution.

‘But we must do everything possible to prevent problems which could pose a wider threat to stability.

‘At the centre of our banking reform proposals are new powers for both the FSA and the Bank and improved procedures for co-ordination between them.

‘These will reduce the likelihood of failure, lessen the impact if it happens and ensure that savers are properly protected.’