Lord Turner, chairman of the Financial Services Authority, has said that regulators should make rules to limit bank lending to avoid asset bubble in future.

He also said that he might back US President Barack Obama’s radical plans to compel banks to split up their businesses into separate retail and investment businesses.

Speaking at the World Economic Forum in Davos, Lord Turner said that bank regulators should be given more powers to prevent asset price boom-bust cycles.

He called for the creation of a "macro-prudential body", which should have the power to slash lending or borrowing at times when it feared asset bubble could take place.

Speaking on the topic, Mr. Turner further said, "At the end of the day, the committee would decide whether to pull the necessary macro-prudential levers in a discretionary counter-cyclical fashion."

He also suggested that the committee, like the Monetary Policy Committee, should contain outside economists- if possible ‘mavericks’.

Mr. Turner’s plans, if adopted, would put banks under far more intrusive, direct control of the regulators.