Bank of England faces calls for full review of handling of financial crisis

The Treasury report highlighted 'sometimes strained' relationships between the tripartite authorities at the highest level. Photograph: Martin Argles for the Guardian

The Bank of England is facing calls to publish a full account of how it handled the financial crisis after the Treasury admitted it had made mistakes when the UK's banking system was on the brink of collapse.

In a 60-page review the Treasury was found to have failed to foresee the financial crisis and been too slow to recruit enough people. It now needs to slow down its high staff turnover if it is to handle any future crisis effectively.

The Treasury's account – the result of the public accounts committee calling for a "lessons learnt" report – portrays tensions at the top of the tripartite system of regulation, which divides responsibility between the Treasury, the Bank of England and the Financial Services Authority. This system is being ripped up by the coalition, which is handing more power to the Bank of England.

The publication of the Treasury's review sparked Andrew Tyrie, chairman of the Treasury select committee, to call on the Bank of England to do the same.

"The Treasury's decision to publish its internal review reinforces the need for the Bank of England to undertake this work at the soonest appropriate time," said Tyrie.

"The fact it has not yet been done is a reflection of the defects in the Bank's corporate governance which must now be remedied by the legislation currently before the House," he said.

While the Bank of England has not published such a single, formal assessment of the crisis, it put a section on its website on 6 February outlining a number of responses to the financial crisis.

Andy Love, a Labour MP on the Treasury committee, said: "We are very keen that the Bank should carry out a comprehensive review of all its activities, in order to clear the air, to make it clear that they are open and transparent, to show that they have learned from the experience and to give confidence that they will be able to deal with any future problems."

Love said the FSA had gone through a painful review process and the Treasury had now "come clean" about its handling of the crisis. "It remains for the Bank of England to ensure that parliament and the public are convinced that they have gone through a similar exercise."

The Treasury's report set out the need for "strong incentives" for staff to stay for longer in the department, which has the highest turnover in Whitehall. Salaries in the FSA and the Bank can be double those at the Treasury and they are even greater in the City. The Treasury also needs "reservists" who can be called on during any future crisis, and must strengthen its relationship with the Bank of England.

There had been 20 staff working in financial stability in September 2008 when Lehman Brothers collapsed, which reached 45 by the end of the year and peaked at around 200 during 2009. Lawyers brought in from Slaughter & May had "worked well from the start" but relationships with investment banks, including from Goldman Sachs, were "less effective initially".

The review describes relations at "principal level" within the three regulators as being "sometimes more strained" than the good working relationship lower down the organisations and describes Treasury officials as working "at a faster pace" than those at the Bank.

"There were sometimes issues arising from different cultures and working styles between the Treasury and Bank. Bank officials are accustomed to working in a more hierarchical structure and took a more considered and analytical approach," the review said.

There was some "difficulty in communication" between the Treasury and the FSA as well as "some difficulty" around the Bank of England's concerns about "moral hazard" in providing emergency liquidity support to Northern Rock, which in September 2007 suffered the first bank run in Britain since Overend, Gurney & Co in 1866.

In his memoirs, Alistair Darling, then Chancellor, highlighted tensions with Bank of England governor Sir Mervyn King.

The Treasury's review, conducted by Sharon White who is now head of public spending in the department, highlights "staff churn". Staff turnover peaked at 38% in 2008. Its staff are also the youngest, with an average age of 32 compared with 45 elsewhere in the civil service.

"The Treasury, like many other institutions, did not see the crisis coming and was consequently under-resourced when it began. The Treasury responded nimbly – with a strong 'esprit de corps'," the review said.