Financial Services Authority chairman Adair Turner today weighed into the row over regulating big banks as he declared himself in favour of tougher solvency rules.

Turner said he was "open" to the idea that UK institutions should be forced to increase the amount of cash they hold as a buffer to get themselves over any massive crisis.

Earlier this week, Bank of England governor Mervyn King declared banks should not be allowed to get "too big to fail". He argued that it was wrong to have a financial system where any bank was allowed to get so big that, when it got into difficulty, it had to be bailed out by the taxpayer in order to save the wider economy.

Turner did not go as far as King, but said: "We don't want to define definitely a category which is 'too big to fail'. It's more likely to be a sliding scale of capital requirements."

He added that, given the current crisis was caused by too much lending, "the fact that higher capital requirements and tighter liquidity might constrain lending may be a good consequence".

The issue of how to regulate the world's big banks has become a huge political battleground.

European leaders broadly want to centralise regulatory powers on the continent restricting the leveraging activities of hedge funds and private equity firms.

Some experts argue that High Street lenders who are crucial to the country's economy, should not be allowed to also run high-risk investment banking arms.