THE Governor of the Bank of England has said it could be months before the full extent of losses in the fallout from the North-East bank Northern Rock crisis are revealed.

But Mervyn King said he was optimistic that the British banking system had come through.

In an interview with BBC Radio's File On 4, he said: "The British banking system has not collapsed, it has come through.

"And we will come out of this with new legislation which will give the regulators an opportunity to intervene pre-emptively - earlier than we were able to on this occasion, with better deposit insurance arrangements and with a better focus in the future on the regulation and management of liquidity."

Asked if the economy was still fragile, he said: "Things have improved significantly since August when the crisis began. We are not back to normal in terms of a number of important financial markets but things are improving.

Most people expect that we have several more months to get through before the banks have revealed all the losses which have occurred, have taken measures to finance their obligations that result from that.

But we are going in the right direction.

"There is always, in a period like this, the possibility that a shock from outside the UK, one from the world economy, might create further fragility. But to some extent there are always risks, there is always fragility.

What I would say is that the situation now is in my view different from that in August, though its not without risk."

Mr King also said he told Chancellor Alistair Darling that any decision to back a takeover bid of the bank was a matter for government.