Governor slams bank reform failure

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The Governor warned the public would be paying for the financial crisis "for a generation" and said there was no reason why guarantees could not be limited to traditional banking rather than casino-style trading.

Despite almost £1 trillion spent propping up banks, Mr King said: "To paraphrase a great wartime leader, never in the field of financial endeavour has so much money been owed by so few to so many. And, one might add, so far with little real reform."

He said the the "massive support" to the global banking sector was "necessary to avert economic disaster" but warned it had created "possibly the biggest moral hazard in history".

He said banks should not be encouraged to earn their way out of state support by "resuming the very activities which got them into trouble in the first place" and called for a "serious review" of how the banking sector is regulated.

City minister Lord Myners said the Bank of England and the Government were "very much on the same agenda" over banking reform.

"We in government have been active proponents of the living will which will require some separation of their investment banking activities from their retail banking activities," he said.

He added: "What we can do is ensure that banks are structured in a way that allows them to fail in terms of their investment banking activities... The protection of retail depositors is a matter of national importance and one that the Government will not in any way deviate from."