Former Bank of England governor Mervyn King is calling for radical banking reform to end what he sees as the unsustainable practice of liquidity and risk transformation by banks.

In his book, The end of alchemy, due to be published on March 3, King outlines proposals that fall somewhere between the current system of fractional reserve banking and one of "sovereign money". The latter would force banks to match all of their liabilities with liquid assets, leaving the central bank as the only body