Bank's deputy governor to step down

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Sir John, who is responsible for financial stability, said he would relinquish the role in early 2009 after legislation was put in place giving the position new powers to deal with failing banks.

Last year Sir John was savaged by MPs for his role in the collapse of Northern Rock, with the Treasury Select Committee accusing him of sleeping on the job.

News of his departure broke as Chancellor Alistair Darling was delivering his inaugural Mansion House address.

In the speech, Mr Darling announced plans to shake up regulation of the financial services, giving the Bank of England a new legal responsibility for financial stability.

He confirmed that the basic framework of the system would remain but that the Bank's decision-making process would be assisted by a Financial Stability Committee guiding operations in the field.

Sir John had been expected to make the announcement confirming he would resign.

But the Bank of England was forced to bring forward a statement after the news broke early, confirming: "Sir John Gieve has decided he will leave the Bank next year once changes to the Bank's responsibilities have been made, including a new Special Resolution Regime for failing banks. Sir John believes the Bank's new responsibilities should be led by a new deputy governor who will serve a full term."

Sir John said: "In recent months I have been leading work in the Bank on a new and better framework for financial stability. I fully support the new proposals and, in particular, the enhanced role for the Bank of England.

"The new legislation will change the role of the Bank and, within that, the deputy governor for financial stability including giving him the key role in dealing with failing banks."