Sources said Sir John, who has been in the role at the Bank since January 2006, will make the announcement on Thursday.

Last year, MPs savaged his handling of the Northern Rock crisis, with the head of the powerful Treasury Select Committee accusing him of failing to do his job.

Sir John was due to serve as deputy governor until January 2011.

Word of his resignation came as Chancellor Alistair Darling announced plans to overhaul regulation of the financial services, giving the Bank of England a new legal responsibility for financial stability.

In a statement released after the news broke, the Bank of England said: "Sir John Gieve has decided he will leave the Bank next year once changes to the Bank's responsibilities have been made, including a new Special Resolution Regime for failing banks.

"Sir John believes the Bank's new responsibilities should be led by a new Deputy Governor who will serve a full term."

Mervyn King, governor of the Bank of England, said: "I am grateful to John for his hard work and loyalty. I can understand why he does not want to assume the new position, but I am very glad he is staying on to see us through until the Bill is law."

Among those being rumoured to replace Sir John is Charles Bean, currently the Bank of England's chief economist.