Chancellor Alistair Darling has promised tighter regulation of the financial system and warned that "complacent" bankers considering a return to a culture of excessive risk-taking will be "brought back to Earth".

Chancellor Alistair Darling has promised tighter regulation of the financial system and warned that "complacent" bankers considering a return to a culture of excessive risk-taking will be "brought back to Earth".

Speaking ahead of the launch of a white paper on banking reform, Mr Darling said it would be "disastrous" if bankers got the idea the crisis was over and they could go back to their old ways.

"Some are only operating at all because of very substantial support from taxpayers, who are entitled to tell the government we must not repeat the mistakes," said Mr Darling.

"If they go back to the way they were - to business as usual - without asking themselves over and over again whether they understand what they are doing, that would be disastrous for them and the rest of the world."

In a newspaper interview, Mr Darling indicated that next week's white paper would include new powers for the Bank of England and the Financial Services Authority to prevent a repeat of last autumn's meltdown.

But amid signs of the return of the bonus culture in the City of London, Mr Darling admitted he could not legislate against the banking bonuses. "You can't have a pay policy in legislation," he said.

"Every single director of a bank should ask themselves, Do I understand what the bank is doing and the risks it is being exposed to?'"

The Chancellor, who controls a public stake of 70% of the Royal Bank of Scotland and a 43% stake in the Lloyds group after last year's banking collapse, said the sector had to remain vigilant in order to guarantee recovery.

"As the economy begins to recover, people must not drop their guard but strengthen their guard to make sure they don't repeat the mistakes of the past," said Mr Darling. "Similarly, the regulators must keep a very close eye on what is happening and be vigilant about the risks. It is very important people don't get the idea it is all over, that they don't need to bother."

He maintained his belief there has "clearly been a very sharp V-shaped recession" and he was confident the economy would start to grow again by the end of the year.

Mr Darling played down reports of a rift between him and Bank of England governor Mervyn King and the FSA, led by Lord Turner, over who will wield powers to regulate the banks.

"In any healthy democracy there is bound to be a discussion. It would be very odd if three people never disagreed. It is not a turf war. It is a question of ensuring they both do the job they are set up to do and both do it effectively. They are not competing with each other. They are complimentary," he said.

He indicated the white paper would retain the "tripartite" regulatory system, which divides responsibility between the Bank, FSA and Treasury, and he said the Bank and FSA would both get the "new tools" they needed to do their jobs effectively.

The Bank is expected to be given a central role in preventing future booms from turning into burst bubbles and assessing risks to the system, as well as to individual banks.

The FSA will be told to take a more pro-active approach to preventing bonuses that reward short-term profits and in ensuring banks hold more capital reserves to provide a safety net.