Will savings be given £100,000 safeguard?

The Bank's Governor Mervyn King favours a fundamental overhaul of the banking system that would give savers better protection.

Mr King also says the plan would stop a run on any other bank in distress, by guaranteeing savers up to £100,000 as soon as an institution ran into trouble.

The current system, whereby savers are guaranteed the first £35,000 of their investments, was widely cited as part of the cause of the run on the Northern Rock.

Thousands of customers camped outside branches to pull out all their their cash. Chancellor Alistair Darling was forced to intervene and guarantee their savings.

By raising the level to £100,000, Mr King is said to believe this would stop another run on a bank because customers would feel their money was safe.

His proposals are based on the U.S. system under which customers' deposits are insured. Reports suggest-there are increasing tensions between Mr King and Mr Darling, and with Gordon Brown.

One said Mr King wants to drive through the reforms, but it is being frustrated by the Chancellor and Prime Minister, who are said to be too demoralised by recent setbacks to take action.

Quoting a senior Bank of England official, the report said Mr Brown and Mr Darling are "unable to focus because morale throughout the Government is so low".

However, a Bank of England spokesman said: "The story is complete nonsense.

"Most of the details have been lifted from a speech the Governor gave in Belfast in October."

A Treasury source also said there was "absolutely no truth" in claims that Mr Darling had "lost focus".

The source also said: "Suggestions that there is any bad blood or bad form between the Chancellor and Mervyn King are absolute rubbish.

"They have always been on good terms and recently enjoyed a convivial breakfast together recently."