LONDON (Reuters)—The Bank of England will gain new powers to curb credit binges and prevent another crisis as it takes over control of financial regulation in Britain, new finance minister George Osborne announced on Wednesday.

The Chancellor of the Exchequer also said that former BoE chief economist John Vickers would head up a new independent commission that would look at, among other things, whether retail and investment banking should be broken up.

"The worst financial crisis in living memory highlighted the significant detrimental impact that failure in the financial sector can have on the real economy and the public finances," said Mr. Osborne, who took office last month.

"We need a proper debate about the future structure of banks, the relationship between retail and investment banking, and the question of how to ensure greater competition in the banking industry."

The 39-year-old Conservative had been expected to make the announcement at the annual "Mansion House" dinner to the City of London's financial elite on Wednesday evening, but opposition lawmakers demanded that parliament be told first about any changes to the regulatory structure.

Mr. Osborne duly obliged and told lawmakers the tripartite structure set up by the previous Labor government in 1997—where responsibility for financial stability was shared by the Treasury, BoE and Financial Services Authority—had been an abject failure.

"Our plan is to hand over to the Bank of England responsibility for macro prudential supervision, that should never have been taken away from it," he said.

"l'm also committed to handing over responsibility for micro prudential regulation. It's clear the Bank needs to have a greater understanding of what's going on in firms."

Before the May 6 election, Mr. Osborne had pledged to abolish the FSA but there has been much speculation as to whether it would carry on in some fashion as a subsidiary of the BoE.

Mr. Osborne said there would be a written ministerial statement on the FSA's future on Thursday.

New tools

The BoE will also get new tools to regulate credit cycles and fulfill its mandate of macroprudential supervision, Mr. Osborne confirmed on Wednesday.

Many of these would require international agreement but would undoubtedly include powers to make banks build up capital buffers in the good times for use in the bad.

Mr. Osborne is also expected to establish a powerful new Financial Policy Committee. Both BoE Gov. Mervyn King, who will also address the Mansion House dinner on Wednesday, and Deputy Gov. Paul Tucker would be on the committee, whose job would be to preserve financial stability.

The new finance minister is also expected to confirm he will press ahead with a levy on banks, which has been promised by Britain's coalition government, but details are only likely to come in next week's budget.