Barack Obama's bank reforms will be top of the agenda when MPs question Bank of England governor Mervyn King today.

The Treasury Select Committee is meeting to hear evidence on the debate over banks that are “too big to fail”, days after the US President put forward his plans to curb banks' activities.

His proposals include banning retail banks from using their own money in investments instead of their customers' funds, and restricting banks' abilities to make high-risk trades.

The plans are a step towards splitting retail and investment banks, of which Mr King has been a fervent supporter.

Last spring he became the first senior figure to suggest separating high street banks from what he called the “casino trading” of investment banks. He said Britain needed a wide range of policy tools to help regulators rein in the expansion of financial institutions.

The Conservatives, who are also keen to hand the Bank of England more regulatory powers, have supported Mr Obama's reforms but Labour has warned against them. Alistair Darling told the Sunday Times that the US risked harming world economic recovery by going it alone.

“If everyone does their own thing it will achieve absolutely nothing,” the Chancellor said.

“The banks are global — they are quite capable of organising themselves in such a way that if the regime is difficult in one country, they will go to another one and that doesn't do anyone any good.”

Mr King has not been shy in opposing the Government's views and in his first speech of the year last week he criticised Mr Darling once more for budgetary irresponsibility. He said a sustained economic recovery could not take place “without the elimination over time of the structural deficit in the public finances”.

He made it clear he expected Mr Darling to follow through on pledges over the public finances in last year's Budget.

However, Mr King has his own challenges to face after inflation figures last week showed a far bigger than expected rise to 2.9 per cent in December. The Bank will also have to stop the quantitative easing programme, which could have an effect on the delicate economic recovery.