‘Banks have to resume their property place in economy’

Mr Tucker wrote in an op-ed piece that banking “should not depend on a safety net from taxpayers” and that “a much broader view” of the financial system was needed to instil market confidence.

“Those who espouse the disciplines of capitalism – bankers and financiers – should live them,” he told the Financial Times. He added: “Regulators have to recognise that the rules of the game failed to keep up with the progressive fusion of banking, capital markets and insurance; and were not modified in response to accumulating macroeconomic imbalan- ces.”

He called on the G20’s financial reform programme to go “beyond traditional policy options” and put in place a credible regime for managing failing financial institutions, which would solve the “too big to fail problem.”

“A credible resolution regime will ensure that debt holders, as well as equity holders, are exposed to loss.

“Creditors will have a powerful incentive to monitor the risks banks run, increasing market discipline,” he said.

The second priority for reform is to ensure that regulatory regimes recognise the inter-connectedness of capital markets and their interaction with the macro-economy, according to Mr Tucker.

He added: “We need a strong financial system: the end of too big to fail, with banking resuming its proper place in a market economy.”

Commentators see Mr Tucker as the leading internal candidate to succeed the Governor, Sir Mervyn King, who is due to stand down in 2013.