City spokesman Alistair Darling said: 'The select committee has produced a damning indictment of the Bank of England supervision of BCCI.
'It is especially noteworthy that none at the Bank appears to have accepted responsibility for its failure.
'It is regrettable that the government pressurised the Tory members of the select committee into deleting the recommendation that the chancellor should look again at the question of compensation for those who lost substantial sums. The depositors are bound to feel bitter at the treatment and attitude of the government, especially when they consider the treatment of other investors who lost out following the Barlowe Clowes collapse.
'Regulation of banking and financial services is in desperate need of overhaul and there is clearly a case for considering a new body whose sole responsibility would be banking supervision and whose attention would therefore not be deflected by other issues'.