The Chancellor told the Treasury Committee: "We will make clear where we think mistakes have been made and we have made it very clear that we thought it was a mistake to try and bail-in the insured depositors over the last week.
"But we are also here to try and resolve this situation because in the end, as we have discovered to our costs over the last couple of years, developments in the eurozone have a very direct impact on the British economy.
"If financial markets become concerned that also has a direct impact on the global financial system."
An administrator has told Reuters he has been appointed to take over the running of the Bank of Cyprus. Earlier today it was reported the Bank of Cyprus chairman Andreas Artemis had submitted his resignation,
British pensions will not be paid into Cypriot bank accounts for the "foreseeable future" and expats are being advised to open UK accounts, the Department of Work and Pensions said today. A spokesman said:
We are advising customers to change the bank account into which payments are made, for example by nominating an alternative bank account or the account of a 'trusted friend' which is permissible under our current rules on benefit payment.
This is a practical measure to ensure that payments reach our customers promptly, and we are not advising these customers to close their Cypriot bank accounts.
Customers who do not currently have another bank account may wish to open one. HM Treasury have also worked with Barclays to put in place a process so that individuals can open a bank account quickly if they wish to do so.
The Bank of Cyprus chairman Andreas Artemis has submitted his resignation, a bank source has told Reuters.
Protests are taking place outside the presidential mansion in Nicosia, in Cyprus. The crowd is chanting for Troika to leave Cyprus alone - Troika is made up of representatives from the European Central Bank, the EU and the IMF.
Some Russian banks are consulting lawyers over possible claims against Cyprus for unfair treatment.
The Cypriot finance minister Michael Sarris has said he thinks capital controls will last "a matter of weeks" in an interview with the BBC.
A Financial Times leader article (£) has said that the Cyprus bailout has set "profound precedents" for Eurozone banking.
A contemplated deposit raid and actual capital controls will weigh on the European economy.
Against that, some healthy precedents are set by the deal. Broke banks can be resolved and not kept alive by the taxpayers of their own or other countries.
The hierarchy of claims will be respected: the bail-in of senior bonds is a big improvement on earlier “rescues”.
The quiescence of markets prove they can tell solvent debtors from insolvent ones.
Cyprus' rescue deal has sent shivers through southern Europe after a key eurozone figure said it would be a model for future bailouts.Read the full story ›
Cyprus' central bank said all banks in the country will remain closed until at least Wednesday.
The banks were due to reopen on Tuesday morning.