The government will propose new legislation to give the authorities more power to intervene in the case of a failing bank to prevent another Northern Rock-style crisis, the Treasury said.
The government will on Wednesday launch a 12-week consultation on improving the framework to preserve financial stability and protect depositors in case a bank should fail. The full proposals will be published at 9:30 a.m.
In the event of an institution getting into trouble, triggering a special resolution regime, the authorities will get the power to appoint a restructuring officer in exchange for emergency support, the Treasury said.
The proposals follow, in large part, measures set out by a parliamentary committee over the weekend though fall short of creating a new financial stability job at the Bank of England.
Still, the central bank's remit in ensuring the stability of the financial system will be formalised to make sure this is beefed up.
Regulators have come under fire after the country suffered the first bank run in more than a century in September after mortgage lender Northern Rock had to seek emergency funding from the Bank.
The consultation envisages the tripartite regulatory arrangement will stay in place. So the Treasury will remain in charge of the overall framework, the Bank for monetary policy and financial stability and the Financial Services Authority for supervision.
Chancellor Alistair Darling will remain ultimately responsible.
The Treasury is also seeking views on how much deposits should be protected. Currently, only up to 35,000 pounds are guaranteed but there is a desire to do more. It will also consult on the best way to pay for a deposit protection scheme.
