Tories unveil banking reform plans

The Tory leader said the tripartite system introduced by Gordon Brown was a "policy failure of historic proportions" that was directly to blame for the crisis facing the country.

He dismissed the Government's proposed reforms as inadequate measures that jeopardise recovery, promising instead to give sweeping new powers to the Bank of England.

Under Conservative proposals, it will regulate City pay structures, risk-taking and the size of financial institutions, with the FSA swallowed up into a new consumer protection body.

The Government plans to keep the "tripartite" system - involving the Bank, the FSA and the Treasury - but introduce an overseeing Council for Financial Stability.

Launching the reform plans, Mr Cameron said: "The decisions that led to this crisis represent a policy failure of historic proportions. We now need deep, wide-ranging reform that matches both the magnitude of the crisis and the scale of the hardship inflicted on the British people.

"That reform must be based on a clear understanding of what went wrong in the first place and a clear determination to put it right."

The Tory proposals were unveiled as the Liberal Democrats called for the banks now in part public ownership to be broken up before being returned to the private sector.

The party's Treasury spokesman, Vince Cable, said Britain's banks had become "the financial equivalent of Chernobyl" and radical safety measures were required to make them less of a threat to the economy.

In a speech to the London Stock Exchange, Mr Cable said major reforms were needed to the banking regulation system, including measures to make it easier for large institutions to fail without the state being forced to step in and save them.