Mandelson backing FSA against Bank
Lord Mandelson is to risk fuelling the spat between the Government and Mervyn King by dismissing calls for the Bank of England to lead financial regulation in the UK.
The Business Secretary is to insist that the Financial Services Authority (FSA) must be strengthened, rather than giving away some of its powers.
He will also warn against "knee jerk" limits on the activities of banks in the wake of the credit crunch.
The comments, in a speech to be made to bankers on Monday night, come amid signs of a deepening rift between ministers and Mr King.
The governor recently used a Mansion House speech to make an extraordinary demand for more control over financial institutions, and to suggest that the biggest banks should be broken up.
He also surprised MPs by claiming he had not been consulted over forthcoming regulatory reforms. Publication of the proposals, which are expected to strip the Bank of some of its responsibilities but maintain the current "tripartite" regime, has now been delayed.
Last week an unnamed Cabinet minister was quoted accusing Mr King of fighting a "turf war" with the FSA, and working covertly with the Tories.
At the British Bankers' Association dinner, Lord Mandelson will stress that maintaining the status quo is "not an option".
But he will reject the idea of a "twin peaks" regime, where oversight of banks is split between two bodies.
"While I think there is an argument for the Bank taking a more direct role in financial stability issues, I don't support a twin peaks system," the peer will say. "I believe the lesson of the last year is that we need a stronger regulator, not a weaker one."
