As we have covered over the last few days there appears to be a significant rift growing between the UK government and the Bank of England with Mervyn King, Alistair Darling and Gordon Brown apparently at loggerheads. The issue came to a head at the recent Mansion House dinner where comments by Mervyn King appeared to be at odds with the thoughts and understanding of the UK government. So what exactly is going on?

It has become more and more apparent over the last few days that Mervyn King and the Bank of England in general have not been as active in the writing of new regulations as they perhaps should have been. The UK government has taken control of the situation and effectively told Mervyn King and his Bank of England colleagues that they will be forced to adhere to these new rules as and when they are announced.

So we have the governor of one of the largest banks in the world out of the loop with regards to regulatory changes and the future of the financial services industry. It does appear as though a Mervyn King had kept quiet for some time until the UK government announced it would be releasing new regulations in the short term. Where we go from here very much remains to be seen.

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