Brown rejects "loose cannon" charge vs Bank's King

LONDON (Reuters) - Prime Minister Gordon Brown praised Bank of England Governor Mervyn King on Thursday, dismissing a suggestion the central banker's recent remarks about financial regulation showed he was out of control.

"The Governor does a very good job and people recognise his talents. That's why he was appointed for a second term," Brown told a parliamentary committee, when asked by a legislator whether he thought King was a "loose cannon".

Brown also lauded the central bank's success in keeping inflation under control.

King has complained about not having been consulted on the government's latest proposals for financial regulation and said the Bank lacked the tools to intervene if a financial institution ran into trouble.

Responsibility for financial regulation is split between the Bank, the Financial Services Authority and the Treasury. The government announced last week it was setting up a new Council of Financial Stability, made up of the current bodies in the "tripartite" system, to improve monitoring of banking risks.

"The BoE has always had a role in financial stability. The BoE is always involved in these issues affecting financial stability, but the regulation of individual institutions is better done by regulatory authorities like the FSA," Brown said.

"You will always have a system where the regulatory authority, central bank and finance ministry have to work together. It's not that we're moving from the previous system , we've got to make it even stronger."

One of first major institutional changes enacted by Brown's Labour government when it won power in 1997 was to grant the Bank autonomy over monetary policy and require it to keep inflation at 2 percent, a strategy that had been successful, Brown said.

"The record of the Bank in controlling inflation has been very good indeed," he told the parliamentary committee.